DISP App 3.3A The approach to considering evidence at step 2
1This section applies to a CCA lender at step 2.
Assessment of fairness of relationship
Where the firm did not disclose to the complainant in advance of a payment protection contract being entered into (and is not aware that any other person did so at that time):
- (1)
the anticipated profit share plus the commission known at the time of the sale; or
- (2)
the anticipated profit share plus the commission reasonably foreseeable at the time of the sale; or
- (3)
the likely range in which (1) or (2) would fall;
the firm should consider whether it can satisfy itself on reasonable grounds that this did not give rise to an unfair relationship under section 140A of the CCA. The firm’s consideration of unfairness should take into account all relevant matters, including whether the non-disclosure prevented the complainant from making a properly informed judgement about the value of the payment protection contract.
DISP App 3.3A.2E reflects section 140B(9) of the CCA which provides (in summary) that, if the debtor alleges that the relationship between the creditor and the debtor is unfair to the debtor, it is for the creditor to prove to the contrary.
Presumptions
- (1)
The firm should presume that failure to disclose commission gave rise to an unfair relationship under section 140A of the CCA if:
- (a)
the anticipated profit share plus the commission known at the time of the sale; or
- (b)
the anticipated profit share plus the commission reasonably foreseeable at the time of the sale;
was:
- (c)
in relation to a single premium payment protection contract, more than 50% of the total amount paid in relation to the payment protection contract; or
- (d)
in relation to a regular premium payment protection contract, at any time in the relevant period or periods more than 50% of the total amount paid in relation to the payment protection contract in respect of the relevant period or periods.
- (a)
- (2)
The firm should presume that failure to disclose commission did not give rise to an unfair relationship under section 140A of the CCA if the test in (1) is not satisfied.
The presumption that failure to disclose commission gave rise to an unfair relationship is rebuttable. Examples of factors which may contribute to its rebuttal include:
- (1)
the CCA lender did not know and could not reasonably be expected to know or foresee the level of commission and anticipated profit share; or
- (2)
the complainant could reasonably be expected to be aware of the level of commission and anticipated profit share (e.g. because they worked in a role in the financial services industry which gave them such awareness); or
- (3)
disclosure would have made no difference whatsoever to the complainant’s judgement about the value of the payment protection contract. This factor is only likely to be relevant in limited circumstances. If the firm concludes that disclosure would have at least caused the complainant to question whether the payment protection contract represented value for money and whether it was a sensible transaction to enter into (regardless of whether they may or may not have ultimately gone ahead with the purchase), then the presumption is unlikely to be rebutted due to this factor.
The presumption that failure to disclose commission did not give rise to an unfair relationship is also rebuttable. An example of a factor which may contribute to its rebuttal includes that the complainant was in particularly difficult financial circumstances at the time of the sale.
Reasonably foreseeable commission
For the purposes of the provisions in this section, what is reasonably foreseeable should be determined with regard to all relevant factors, including, where relevant, any agreement specifying rate changes over the first years of the payment protection contract’s life (as in some regular premium payment protection contracts), and the length of time over which the commission will be governed by the agreement between lender and insurer that is in place at the time of sale.