Supreme Court revives time-barred PPI claim against Canada Square
On 15 November 2023, the Supreme Court ruled that a claim over the misselling of a payment protection insurance policy (PPI) was not time-barred as the commercial lender (Canada Square Operations Ltd) had failed to disclose that it was charging a ‘substantial commission’ on the policy.
Beverley Potter, entered into a loan agreement with Canada Square Operations in 2006, known as Egg Banking plc at the time, for a cash amount of £16,953 and a PPI premium of £3,834.24. The premium related to Potter’s purchase of a PPI policy.
The judgment, a unanimous one, said over 95% of the amount described in the agreement as the PPI premium constituted Canada Square’s commission. Only £182.50 was paid to the insurer and Potter was not informed that Canada Square would receive or retain the commission.
Potter had completed the payments under the agreement, which came to an early end in March 2010.
In April 2018, Potter complained that she had been missold PPI and received compensation in accordance with the redress scheme established by the Financial Conduct Authority for the misselling of PPI. In November 2018, she consulted solicitors who advised her the payments ‘were likely to have included substantial commission’.
The county court found in Potter’s favour. Canada Square unsuccessfully appealed to the High Court and the Court of Appeal.
The case has generally been referred to as a ‘test case’ by the Supreme Court with it being said that there are ‘approximately 26,000 active claims of a similar nature’ and may now be considered to be in time.
Principal firm and Appointed Representatives (AR) regime
Recently, the Financial Conduct Authority (FCA), has made scrutiny of principal firms and ARs a priority, and can be seen as going hand in hand with the Consumer Duty introduced earlier this year.
An AR carries on regulated activity under the responsibility of an authorised firm, known as 'the principal'.
Principals and ARs have greater levels of complaints and supervisory cases than directly authorised firms indicating wide-ranging, cross-sector harm.
The FCA are stressing that principal firms have an obligation to show reports showing that firms understand what controls and oversight they have. An overview of what the FCA will be looking at include the following:
- Enhanced oversight requirements: Apply enhanced oversight of ARs, including ensuring having adequate systems, controls, and resources.
- Annual self-assessment: Prepare a single document demonstrating compliance with obligations as a principal, identifying any risks and gaps. The firm’s governing body should review and sign off this document at least annually.
- Annual review of AR’s activities and business: Annually review information on the ARs’ activities and business, including the fitness and propriety of senior management, the ARs’ financial position and the adequacy of the principal’s controls and resources to effectively oversee the AR.
- Review oversight approach: Principals should review whether their oversight remains appropriate in certain situations, for example, the size or volume of the AR business involving regulated activity increases significantly in a short period of time.
- Notification of planned AR appointments: Notify us of an intended AR appointment 30 calendar days before it takes effect. Our new forms gather more detailed information.
- Annual reporting: Provide complaints and revenue information for each AR to the FCA on an annual basis and confirm AR details are correct as part of annual attestation.
It is essential that firms revisit these areas, in particular structure and oversight of the firm, to comply with these obligations.
Consumer Duty webinar
The FCA will be hosting a webinar on 6 December 2023 to help firms understand our expectations now the Duty is in force. This will focus on:
- Our supervision and enforcement approach
- Sector specific areas of focus
- Examples of good practice
- Next steps for firms