UK: Consumers’ Failure to Read Loan Documents Does Not Mitigate a Firm’s Obligation to be Clear, Fair and Not Misleading


    In the case of (1) Mr Abraham Figurasin (2) Mrs Maricel Palo-Figurasin v Central Capital Ltd and Paragon Personal Finance Ltd [2014] EWCA Civ 504, the Court of Appeal dismissed Central Capital Limited’s appeal.

    Mr and Mrs Figurasin (the Claimants) took out a loan for £25,000 with Central Capital Limited (the Defendant). During a telephone conversation, a representative of the Defendant advised Mrs Figurasin that payment protection insurance (PPI) was included in the monthly repayment. However, the loan documentation sent to the Claimants highlighted that the PPI was financed by an additional loan.

    The Claimants subsequently brought an action against the Defendant on the grounds that the Insurance Conduct of Business Rules (ICOB) were breached, including ICOB 2.2.3(1)(R) which requires a firm to communicate in a “clear, fair and not misleading” manner.

    In the first instance, the Judge upheld the claim that the Defendant did not make it clear that the PPI was financed by a further loan. Although, it was accepted that the Claimants did not read the loan documentation which stated this fact, the Judge held that the influence of the telephone conversation could not be underestimated and accepted evidence that Mrs Figurasin knew nothing about the cost of the PPI.

    The Defendant appealed this decision and the matter was referred to the Court of Appeal. Lord Justice Patten dismissed the appeal on the grounds that:

    i. ICOB 2.2.3(1)(R) must be satisfied whenever a firm communicates to a customer. The information pack was clear, fair and not misleading as required by ICOB, however, the telephone conversation between the Defendant’s representative and Mrs Figurasin did not satisfy ICOB 2.2.3(1)(R). There was an inadequate explanation on how the PPI would be funded and such omission was part of the Defendant’s marketing strategy; 
    ii. Although there were cases where a customer’s failure to read the loan documents was fatal to a claim of mis-selling, the facts of this case are different. In this case, Mrs Figurasin was given a misleading explanation as to the terms of the PPI which lead to the Claimants not bothering to read the detail contained in the loan documentation. The Claimants’ failure to read was not sufficient to remedy the defects in the telephone conversation (as stated by the first instance Judge); and
    iii. ICOB rules are meant to protect consumers from being misled and are not required to accommodate any irresponsibility by the consumers.

    Lord Justice Vos and Lord Justice Laws agreed with the above and also dismissed the appeal.

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