Plevin v Paragon Personal Finance Ltd [2014] UKSC 61

The Supreme Court’s first word on unfair relationships under the Consumer Credit Act, and still the leading authority. A relationship can be unfair because of something the creditor never said, and the burden of proving it was not unfair sits with the creditor.

Why This Case Matters

Plevin was the Supreme Court’s first opportunity to consider the unfair relationship provisions inserted into the Consumer Credit Act 1974 in 2006. It remains the leading authority, and it did two things that continue to shape consumer credit litigation.

First, it established that a relationship can be unfair because of something the creditor did not say, even where there was no legal duty to say it. Second, it made clear that the s140A enquiry is about the relationship, viewed as a whole, and not about whether any particular rule was broken.

The Statutory Framework

Sections 140A to 140C of the Consumer Credit Act 1974 allow a court to find that the relationship between a creditor and a debtor arising out of a credit agreement is unfair to the debtor because of one or more of:

• s140A(1)(a): any of the terms of the agreement or of any related agreement;
• s140A(1)(b): the way in which the creditor has exercised or enforced any of its rights under the agreement or any related agreement;
• s140A(1)(c): any other thing done (or not done) by, or on behalf of, the creditor, either before or after the making of the agreement or any related agreement.

Two features are critical. Section 140A(2) requires the court to have regard to all matters it thinks relevant, including matters relating to the creditor and the debtor. And under s140B(9), once the debtor alleges an unfair relationship, the burden is on the creditor to prove that the relationship was not unfair.

The Facts

Mrs Plevin was a widowed college lecturer. She lived in her own home with a mortgage and had some unsecured personal debt. She had no dependants and had generous sickness cover through her employer, facts which mattered to the second limb of her claim.

She took a loan from Paragon Personal Finance, arranged through a credit broker, and with it a single premium payment protection insurance policy. The PPI premium was £5,780. Of that sum, £4,150, some 71.8%, was commission. Paragon retained part of it and the broker received the remainder.

Mrs Plevin was not told the amount of the commission, nor who was receiving it.

She advanced two arguments. First, that the non-disclosure of the commission made the relationship unfair. Second, that the failure to assess whether the PPI was suitable for her needs made it unfair.

The Ratio Decidendi

The reasoning on non-disclosure

Lord Sumption’s analysis proceeds from the character of the section. Section 140A is not a codification of existing duties. It asks whether the relationship was unfair, and it directs the court to all relevant matters. A thing not done can therefore make a relationship unfair even if no rule required it to be done.

On the facts, a borrower who is told the price of the insurance but not that nearly three quarters of it is commission is in a materially different position from one who knows. She cannot assess the value of what she is buying, cannot judge the intermediary’s incentive, and cannot sensibly shop around. That asymmetry, at that scale, was enough.

The reasoning on “on behalf of”

The second limb is the one practitioners most often misremember. Section 140A(1)(c) covers things done or not done “by, or on behalf of, the creditor”. The Court held that the broker’s failure to assess suitability was not something done on Paragon’s behalf: in arranging the insurance and advising Mrs Plevin, the broker was not acting as the creditor’s agent.

The consequence is that identifying whose act or omission is in issue, and in what capacity it was performed, is an essential step in any s140A claim. A creditor is not automatically answerable for everything an introducer did.

Obiter and What the Case Left Open

• No bright line on percentage. The Court did not lay down a threshold above which commission must be disclosed. The 71.8% figure in Plevin is an illustration of a case comfortably over the line, not a test. Later authority and regulatory practice have supplied working thresholds, but they do not come from this judgment.
• The remedy. The Court’s observations on what should follow from a finding of unfairness (the powers in s140B to require repayment, reduce sums payable, or alter the terms) are guidance rather than a determination. Remedy under s140B is discretionary and case-specific.
• The relationship with the regulatory rules. The comments on the interaction between the statutory unfairness test and the applicable regulatory rules are analytical. The important point is the one the Court decided: compliance with the rules does not answer a s140A claim, and breach of them does not automatically establish one.
• Limitation. The judgment does not address when time begins to run for a s140A claim, which has since generated substantial litigation of its own.

Practitioner Application

Running a s140A claim

• Plead the relationship, not the breach. The statutory question is whether the relationship was unfair. Framing the claim as a series of rule breaches invites the creditor to answer each one and miss the point.
• Use the reverse burden. Under s140B(9), once unfairness is alleged the creditor must prove the relationship was not unfair. That is a significant procedural advantage and should be asserted expressly.
• Identify the actor and the capacity. Establish who did or failed to do the relevant thing, and whether they were acting on the creditor’s behalf. Plevin shows that this determines which allegations survive. Where deemed agency under s56 of the Act is in play, that is a separate route and should be pleaded separately: see our guide to s56 antecedent negotiations.
• Get the commission figures. The amount, the recipients and the proportion of the premium or charge are the core evidence. Pre-action disclosure and subject access requests are the usual routes.
• Consider the forum. The Financial Ombudsman Service applies its own fair and reasonable standard and is not confined to s140A, but it has monetary limits and its own time bars. Our resource on FOS complaints sets out the trade-offs.
• Address limitation early. It is not dealt with in Plevin and it is frequently the creditor’s first line of defence.

Defending one

• Test whether the impugned act or omission was truly the creditor’s or on its behalf.
• Put the relationship in context: what was disclosed, what the borrower understood, what the borrower would have done differently.
• Do not rely on regulatory compliance alone. Plevin holds that it does not answer the statutory question.
• Address remedy separately. A finding of unfairness does not dictate the relief; s140B confers a discretion.

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