A recent case in the Court of Appeal shows that ‘buyer beware’ is still a valid principle.
Just because someone is paid for introducing you to someone else does not necessarily impose on them a duty to inform you of the fact even if the commission they receive for doing so is substantial.
The case was brought by a person who was sold payment protection insurance (PPI) by a financial intermediary. The buyer was not informed by the intermediary that the insurer would pay them a commission for having introduced the buyer. The buyer claimed this was a breach of the provisions of the Consumer Credit Act 1974, because the PPI was undertaken in connection with a loan.
The commission paid was 87 per cent of the premium, which the customer argued was so large that it gave rise to a conflict of interest on the part of the financial institution.
Even though the Court of Appeal described the commission payable as ‘quite startling’, it could not agree that the mere size of the commission and its lack of disclosure led to any unfairness between the financial institution and its customer.
Furthermore, a seller is not obliged to tell a prospective buyer that their product is expensive relative to the market and that a similar product can be obtained for less elsewhere.
Consumer protection law is not uniform in its strength across different products and in different markets.
Partner Note
Harrison and another v Black Horse Ltd. [2011] EWCA Civ 1228.