Wragge Lawrence Graham & Co

UK 200 2014 position: 28

Deemed agency and ‘unfair relationship’

By Greg Standing

The Court of Appeal has once again determined the issues of ‘unfair relationship’ and agency in the borrowers’ favour. In Scotland and Reast v British Credit Trust Ltd, the Court of Appeal held that a broad approach as to the meaning of acting ‘on behalf of’ should be adopted and that even if the ‘Insurance: Conduct of Business’ rules do not apply to the lender, those rules still apply a benchmark against which a lender’s (or its agent’s) behaviour should be judged in determining whether an unfair relationship exists.

In March 2005, the claimants bought double glazing from Bowater Windows trading as Zenith Staybrite following a visit to their home by its salesmen (S). The claimants required a loan (which Zenith was to arrange) to enable them to make the purchase. S told the claimants they had to purchase PPI in order to secure the loan. Zenith, through a broker, subsequently submitted the application for the loan to the lender electronically. At no time was the lender involved in any negotiations with the claimants.

The lender did not, in fact, require PPI to be taken out as a condition of the loan and would have agreed the advance without it. The loan to purchase the double glazing was for £7,430 and the PPI premium £1,133.08. The PPI policy was duly issued by the insurers. The lender earned commission on the premium and interest on the loan that related to it…

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