MSE News: PPI misselling leads to £8,000 debt write-off

Former_MSE_Natasha

This is the discussion thread for the following MSE News Story:

"A landmark legal victory could open the floodgates for millions of people to take credit card companies to court, it is claimed ..."

Read the full story:
PPI misselling leads to £8,000 debt write-off

mnomis

http://newsvote.bbc.co.uk/1/hi/business/8282264.stm


Court lets woman off £8,000 loan


By Ian Pollock
Personal finance reporter, BBC News


The obligation to repay many consumer loans may be undermined

A decision by a county court judge could mean thousands of borrowers being able to renege on their debts. Judge Jacqueline Smart at South Shields county court has decided that the MBNA credit card company cannot demand the repayment of a customer's debt.
It tried to force Lynne Thorius to repay the £8,000 she owed on her card.
But the Judge decided there had been an unfair relationship between Ms Thorius and MBNA because of the way she had been sold payment protection insurance.
'Massive ramifications'
Ms Thorius' case was pursued on her behalf by a claims management firm Cartel Client Review, based in Manchester, and the law firm Consumer Credit Litigation Solicitors.
Carl Wright of Cartel Client Review, said the court decision was a landmark judgement.
"This will have massive ramifications for consumers up and down the country," he said.
But MBNA downplayed the importance of the court decision.
"The judgement went against MBNA for a number of reasons," a spokeswoman said.
"In principle, because the deputy district judge felt that MBNA had not on this occasion provided the appropriate documents to the customer and as such was not able to rely on the clauses MBNA would ordinarily seek to rely on in these cases," she explained.
"The case is a county court case and each case is decided on its own merits and on the factual circumstances of each case. This does not set any legal precedent," said MBNA.
'Secret commission'
The credit card in question was branded with the logo of Sunderland football club and was sold to Ms Thorius in the club's shop in 2002.
The PPI policy was strongly recommended by MBNA to her at the same time, to pay off her account if she fell ill or was made redundant.
But, critically, she had not been told that MBNA would be receiving regular commission payments from the insurance provider ITT London & Edinburgh, a subsidiary of the Aviva insurance group.
Judge Smart agreed with the argument of Ms Thorius's barrister, Paul Brant, that this "secret" commission meant the credit card deal was unfair and therefore in breach the Consumer Credit Act.
This point could potentially undermine many other agreements where PPI has been sold by the lender alongside a loan.
These include car finance deals, other personal loans and even mortgages.
"This practice is believed to be widespread and formed part of the Competition Commission's decision to prohibit the co-sale of PPI with credit in its report published on 29/1/09," Mr Brant noted.
"This point is likely to affect many thousands of individuals within England and Wales," he added.
Repayments
Judge Smart also agreed that the debt on Ms Thorius's credit card was unenforceable because the card company could not provide a copy of the original loan agreement, which is also required by the Consumer Credit Act.
MBNA's claim for the repayment of the outstanding money on the card was rejected.
And the Judge ordered the company either to repay Ms Thorius's PPI premiums and interest, or the value of the commissions it had received which so far has been undisclosed.
The PPI premiums, which rose each month as the credit card debts increased, amounted to £2,500 over the time the card had been in use.
Controversial
The claims management industry which has emerged in the past few years has been highly controversial.
Many firms advertise in newspapers and on television, encouraging people to come forward to write off their debts.
This year the authorities, such as the Office of Fair Trading (OFT), Ministry of Justice (which regulates claims management firms) and the Solicitors Regulation Authority, have warned firms not to make exaggerated claims about their ability to get debts written off because of apparent technical errors in the lenders' paperwork.
Since April 2007 more than 100 such firms, or those advertising for people to pursue personal injury claims, have been shut down by the OFT.

ICan'tStandIt

I really don't know how I feel about such cases.

One the one hand, she's obviously not disputing that she owes the balance (if you minus the PPI premiums), so I think that letting her off the whole lot is very unfair against those of us that play that game and are paying off our debts.

Lynne Thorius is an adult and not a child and however "strongly recommended" the PPI was, she still had the option not to take it out. It would have been billed along with everything else on each and every MONTHLY statement received, so she had plenty of chances to query it or cancel it.

They could have knocked off some of the PPI premiums, but not the whole lot. I think it sends the wrong message to consumers to write off such balances.

On the other hand MBNA and all the others should be forced into shaping up their act in terms of selling PPI and keeping proper records.

I think that Lynne Thorius should have her credit file updated to show that this debt was written off to make lenders think long and hard about giving her any money again in the future.

Paul_Herring

On the other hand MBNA and all the others should be forced into shaping up their act in terms of selling PPI

This has already happened - they're not allowed to sell PPI at the time the loan/card is taken out.

bert&ernie

Paul_Herring wrote: »

This has already happened - they're not allowed to sell PPI at the time the loan/card is taken out.

The point of sale ban is being implemented next October. You might ne thinking of single premium policies which have already been banned.

bert&ernie

I haven't had chance to look into this much yet, but it appears to me that the PPI might not be the main issue here. The lender couldn't produce the agreement, so this would make the debt unenforcable.

The bbc story looks like it is a simple composite of cartel's spin with that of mbna added for balance - there is no real insight or analysis.

Balbvs

bert&ernie wrote: »

I haven't had chance to look into this much yet, but it appears to me that the PPI might not be the main issue here. The lender couldn't produce the agreement, so this would make the debt unenforcable.QUOTE]

Do you honestly think that MBNA had 'misplaced' the agreement? If they had produced the document the court would have seen the unenforceable aspects of it and that would have had a real damaging effect on MBNA's ability to defend future claims. This is the first court hearing regarding this matter but claims management companies have had 1000s of successes where settlement has been reached before 'the steps of the court'. MBNA only mounted a challenge to this case because they felt it was winnable. Ooooops!

bert&ernie

Balbvs wrote: »

bert&ernie wrote: »

I haven't had chance to look into this much yet, but it appears to me that the PPI might not be the main issue here. The lender couldn't produce the agreement, so this would make the debt unenforcable.QUOTE]

Do you honestly think that MBNA had 'misplaced' the agreement? If they had produced the document the court would have seen the unenforceable aspects of it and that would have had a real damaging effect on MBNA's ability to defend future claims. This is the first court hearing regarding this matter but claims management companies have had 1000s of successes where settlement has been reached before 'the steps of the court'. MBNA only mounted a challenge to this case because they felt it was winnable. Ooooops!

I take your point, but I think it is still possible that they really have lost the agreement. I expect you assumption is correct though.

What surprises me is that MBNA thought it could win the case without producing an agreement. They probably could have if they got a sympathetic DJ and an litigant in person who wasn't able to argue the points of law strongly enough.

pixwix

Congratulations to this lady, whatever the implications for the rest of us. I had the misfortune to deal with MBNA some years ago. I'll never do business with them again. When things went right, they were all light and kindness. When problems arose (mostly caused by MBNA themselves) they became little better than predatory.

Few financial institutions are exactly moral or ethical these days, but MBNA left a VERY bad taste in my mouth - I was left with an impression of an organisation where the lack of ethics was a matter of cynical policy, not individual employee failure.

I hope this judgment opens the gates to a whole lot more trouble for them - I can think of few firms that deserve it more.

oscar52

[QUOTE=Balbvs;25592875
Do you honestly think that MBNA had 'misplaced' the agreement? [/QUOTE]

Not at all - shredded or destroyed would be far more accurate (if it ever existed) - take it from an employee

Finefoot

Well done to her!
I swear these people at MBNA do not sleep! I am having such hassle with them! They refuse to honor the policy on my account, saying it had been cancelled, but have not provided me any proof. This has been going on since february!!!!!!!