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On appeal from: [2013] EWCA Civ 1658.

The Supreme Court unanimously dismissed the appeal brought by the respondent challenging the interpretation of the Consumer Credit Act 1974, s 140A(1)(c) and asking whether it should be read that an independent broker acts “on behalf of” a lender when they arrange a loan and insurance. The respondent had taken a loan out with the appellant upon taking advice from a personal loan company. Along with the loan, the respondent took out Payment Protection Insurance (PPI) with the appellant’s designated insurer. The respondent was told that “commission is paid by the lending company” but she was not told the amount or the identity of the recipients. She argued that the relationship between herself and the respondent was unfair under s 140A(1)(c) of the Act because of the non-disclosure of the commission and the failure of anyone involved to advise on the suitability of the PPI for her needs.

The Court stated that the non-disclosure of the amount of commissions and the identity of the recipients did make the relationship with the respondent unfair under s 140A(1)(c), but the failure to conduct a needs assessment did not. It stated that the commissions may become so large that the relationship cannot be regarded as fair if the customer is kept in ignorance. It believed that the respondent would have questioned the PPI if she had have been made aware of the commission amounts and, as the respondent was the only party which knew the size of both commissions, it was responsible for the unfairness. It did state that the duty of conducting a needs assessment lay with the personal loan company who recommended the respondent under the Insurance Conduct of Business Rules.

For judgment, please download: [2014] UKSC 61
For Court’s press summary, please download: Court’s Press Summary
For a non-PDF version of the judgment, please visit: BAILII