Plevin v Paragon Personal Finance Ltd

Factual and Procedural Background

The Plaintiff, a 59-year-old college lecturer, sought to consolidate personal debts and fund home improvements. After responding to an unsolicited leaflet from Company A (an independent credit broker), she was introduced to the Defendant for a secured loan of £34,000 and to Company B for a five-year Payment Protection Insurance (“PPI”) policy costing £5,780. The premium was added to the loan, bringing total borrowing to £39,780.

Commissions amounting to 71.8 % of the premium were deducted before remittance to Company B: Company A received £1,870 and the Defendant retained £2,280. The Plaintiff was told only that “commission is paid by the lending company”; neither the amounts nor recipients were disclosed.

In January 2009 the Plaintiff sued Company A and the Defendant. The claim against Company A settled for £3,000. Against the Defendant the Plaintiff asserted that, regarding PPI, the debtor–creditor relationship was unfair under sections 140A–140C of the Consumer Credit Act 1974 (“CCA 1974”). The county court (Judge Yip) rejected the claim, feeling bound by Harrison v Black Horse Ltd. The Court of Appeal expressed dismay but, considering itself equally bound by Harrison, dismissed the appeal save for remitting certain issues. The present appeal followed.

Legal Issues Presented

1. Whether non-disclosure of the scale of PPI commissions rendered the debtor–creditor relationship unfair under CCA 1974, s 140A(1)(c).
2. Whether failure to assess and advise on the suitability of the PPI policy could make the relationship unfair and, if so, whether acts or omissions of Company A were done “on behalf of” the Defendant within s 140A(1)(c).
3. Whether the Court of Appeal decision in Harrison v Black Horse Ltd correctly treated compliance with the Insurance Conduct of Business Rules (“ICOB”) as the “touchstone” of fairness.

Arguments of the Parties

Plaintiff's Arguments

• The relationship was unfair because the Defendant failed to disclose that over 70 % of the premium was retained as commission.
• The PPI policy was unsuitable (cover lasted only half the loan term; the Plaintiff had no dependants; she already held life insurance and enjoyed generous employment benefits). No adequate assessment or advice was provided.
• Company A’s failures occurred “on behalf of” the Defendant, engaging s 140A(1)(c).

Defendant's Arguments

• Under ICOB no duty existed to disclose commission to non-commercial customers; therefore Harrison v Black Horse Ltd governed and precluded a finding of unfairness.
• Company A acted as the Plaintiff’s agent, not the Defendant’s; its omissions could not be attributed to the Defendant.
• No statutory or common-law duty required the Defendant to assess suitability of the PPI policy.

Table of Precedents Cited

Court's Reasoning and Analysis

1. Non-disclosure of commission
The Court held that a “sufficiently extreme inequality of knowledge and understanding” can render a debtor–creditor relationship unfair. With 71.8 % of the premium absorbed by commissions, non-disclosure deprived the Plaintiff of information “of critical relevance” to her decision. Any reasonable borrower would have questioned value for money had the facts been revealed. The unfairness was attributable to the Defendant, the only party necessarily aware of the full commission figures and able reasonably to disclose them.

2. Interaction with ICOB
ICOB sets minimum standards for insurance intermediaries; it is not the determinative measure of fairness under s 140A. Therefore, the absence of an ICOB duty to disclose commissions did not preclude a finding of unfairness.

3. Suitability assessment
The statutory duty to assess suitability under ICOB 4.3 lay on Company A, the intermediary in contact with the customer. The Court found it would be unreasonable to expect the Defendant to perform that assessment when regulation expressly placed it elsewhere. Accordingly, omission by Company A could not make the relationship unfair unless its acts were done “on behalf of” the Defendant.

4. Meaning of “on behalf of the creditor”
The phrase imports agency. The Court rejected the Court of Appeal’s broader formulation that encompassed any conduct that merely facilitated the transaction or attracted commission “via” the creditor. Company A acted as the Plaintiff’s agent, not the Defendant’s; its failures were therefore not attributable to the Defendant under s 140A(1)(c).

5. Voluntary codes
Codes issued by The Association and the Second Association lacked contractual or statutory force and did not convert Company A into the Defendant’s agent. They could inform commercial standards but did not create “shared responsibility.”

Holding and Implications

APPEAL DISMISSED IN PART. The debtor–creditor relationship was held unfair solely because of the Defendant’s non-disclosure of commission. Failures by Company A regarding suitability assessment were not attributable to the Defendant.

Implications: The decision overturns Harrison v Black Horse Ltd, confirming that compliance with regulatory rules does not exhaust the court’s inquiry into fairness under CCA 1974, s 140A. Creditors must consider whether extreme commission levels, if undisclosed, can render relationships unfair even absent a statutory disclosure duty. The matter was remitted to the County Court to determine appropriate relief under s 140B; no new rule on agency was created beyond affirming its traditional meaning.