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London North Securities Ltd v Mr & Mrs Meadows & Another

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  • London North Securities Ltd v Mr & Mrs Meadows & Another

    Useful Case Law for PPI claims

    London North Securities Ltd v Mr & Mrs Meadows & Another
    (Court of Appeal [2005] EWCA Civ 956)
    In 1989, Mr & Mrs Meadows were in arrears with their first mortgage but, following the birth of their second child, wanted to extend their home to provide central heating and an third bedroom. They therefore approached a broker to obtain a loan of £2000, which they believed would be sufficient for their needs. They were sent an agreement to sign for a secured loan of £5,750 at an APR of 34.9% variable, the loan now including a £750 insurance policy and £3,000 to pay off arrears on the first mortgage. During a telephone conversation with the broker prior to signature, Mr Meadows was told that they could not have the loan without these extras, and also that the insurance policy was to provide commission for the broker.
    The loan agreement was executed, but the Meadows went into arrears, this being exacerbated by fees charged for arrears letters and the adding of such fees to the balance, and all interest being compounded. By the time a repossession hearing reached Liverpool County Court the balance had grown to about £⅓ million. The judge declared that the agreement was unenforceable under Section 127(3) of the Consumer Credit Act 1974 because the mortgage arrears and insurance policy were within the total charge for credit, and therefore the amount of credit was wrongly stated. He also stated that the charging of arrears letters at 34.9% was extortionate, because this did not represent the true cost to the lender.
    The lender appealed on the issue of unenforceability, not extortionate credit. The Appeal Court undertook a forensic analysis of the incomplete evidence available after over 15 years, and concluded that the County Court was wrong in only one respect – they considered that Mr Meadows, by means of the telephone conversation, considered puzzling – the insurer was never identified, nor was the policy but it was certain that Mr & Mrs Meadows did not request it, nor did they want it. The policy’s cost therefore remained within the charges, and the agreement remained unenforceable.
    [Full judgment as Microsoft Word document]
    (c) Bob Imrie
    This page last updated 10/08/2005

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