Thought for the Week: Carry on PPI

Last week, the Supreme Court gave judgment in Smith and another v RBS [2023] UKSC 34, an appeal concerning limitation issues in a PPI claim.

The claim

In 2019, the claimants, Ms Smith and Mr Burrell, commenced proceedings against RBS to obtain an order under the Consumer Credit Act 1974 (the Act) that RBS compensate them for PPI payments. 

RBS received a large proportion of the PPI payments as commission, which it did not make clear to customers at the time. Under the Act, if the court finds that a relationship between creditor and debtor arising out of a credit agreement between them is unfair or was unfair at the time that it ended, then it has the power to make a remedial order.

The limitation issue

RBS' primary argument was that the claimants' cause of action came to an end when the last PPI payment was made – namely April 2006 for Ms Smith and March 2008 for Mr Burrell. Consequently, RBS said that the six year limitation (prescribed by the Limitation Act) had expired before the claims were brought. The Court of Appeal and the Supreme Court rejected this argument. 

However, the Court of Appeal reached RBS' position via an alternative route, holding that the claims were time-barred because "the relevant unfair relationship came to an end" when the last PPI payment was made. 

The Supreme Court held that this confused the question of when the relationship came to an end with a different question of when the relationship ceased to be unfair. Instead, the Supreme Court said that the relationship between the claimants and RBS remained unfair after the last PPI payment had been made, because RBS did not repay any of the sums which the claimants had paid for PPI cover nor disclose the existence or the amount of commission received. As such, when the claimants' credit relationships ended with RBS – both within the limitation period – they were still unfair.

The Supreme Court therefore held that the claims had been brought within the limitation period.

What's next?

The confirmation that the unfair relationship – and therefore the cause of action – can continue after the final PPI payment has been made, will prove authoritative for the many PPI claims currently in the County Courts. Banks will need to churn out more compensation for PPI. It may also give rise to a new wave of PPI claims in cases where consumers (and claims management firms) had previously thought their claims might be time-barred. 

And, given that Sections 140A-140D of the Act relate to any unfair credit relationships – not just PPI – debtors seeking redress in respect of other types of credit agreement, particularly where the relationships last for some years, may be encouraged to commence proceedings. The decision could also lead to the inclusion of a wider cohort of claimants in consumer redress schemes mandated the FCA.

That said, it is worth noting Justice Hodge's concurring addendum: "If a debtor sits on his or her hands in knowledge of the relevant facts, it would be […] inconceivable that a court would think it just to make an order". 

Knowledge therefore remains key. Ms Smith and Mr Burrell were not given full information by RBS – and so the relationship remained unfair. Which perhaps leaves consumers and banks back where they started: the clock starts running once consumers know enough to bring a claim.

Authors: Lynn Dunne, Eleanor Robinson and Aaron Marchant