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Published: Fri, 02 Feb 2018
Law of Insurance and Consumer Credit
This essay seeks considers the extent to which the applicable law of Insurance and Consumer Credit identifies the consumer as having a legal status with recognised rights that are considered to be enforceable in law. In so doing this essay states the basic principles of the law relating to Insurance and Consumer Credit before applying it to the position of consumers with a view to recognising as to whether and this serves to give those that purchase goods and services recognisable rights that are deemed to be enforceable through the law of the land before a court against those retailing them.
Identify the extent to which the applicable law of Insurance and Consumer Credit identifies the consumer as having a legal status with rights enforceable in law
In considering the extent to which the applicable law of Insurance and Consumer Credit identifies the consumer as having a legal status with recognised rights that are considered to be enforceable in law, this essay looks to state the basic principles of the law relating to Insurance and Consumer Credit. This essay then seeks to apply such principles to the position of consumers with a view to recognising whether this serves to give those that purchase goods and services recognisable rights deemed to be enforceable through the law of the land before a court against those retailing them. Finally, this essay will conclude with a summary of the key points derived from this discussion regarding the extent to which the applicable law of Insurance and Consumer Credit identifies the consumer as having a legal status with recognised rights considered enforceable in law.
With regard to the matter of consumer rights in the context of insurance agreements, it was recognised in the case of Prudential Insurance Co v. IRC  that all insurance contracts need to provide some benefit for the insured when a particular event occurs that involves some element of uncertainty that is prima facie adverse to the interest of the assured.  That there is a need for there to be a level of uncertainty recognised in all insurance contracts is marked by the fact that it is not possible to insure those events that are considered ‘certain’ (e.g. perishable goods deterioration). This is because the risk that is involved in a given insurance contract needs to be beyond the insurer’s control and the insured is not able to recover due to their own intentional wrongdoing so that there is arguably a degree of balance between the recognition of both the consumer’s rights and those rights of the insurer pertaining to a given agreement – although negligence doe not have to be a hindrance unless it is specifically excluded. 
Prior to there being an insurance contract put in place between an insurer and an insured, however, there is a need to make sure that a contract of utmost good faith (uberrimae fidei) is in place so that it is necessary to look to resolve pre-contractual issues. This is because there are duties in place regarding the fact that there must not be any misrepresentation of material facts and that all material facts need to be disclosed. Then, in the event that these duties are breached by the insured, the insurer can look to avoid the policy ab initio leading to restitution (i.e. the parties are restored to the position they were in prior to the contract). By way of illustration, it was recognised in the case of Carter Boehm  that insurance contracts are founded in ‘speculation’ so that “The special facts, . . . , lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon the confidence that he does not keep back any circumstance in his knowledge, to mislead the under-writer”.  Arguably insurers are still as vulnerable today according to the decision in Woolcott v. Sun Alliance and London Insurance Ltd  because there is a duty on the insured to disclose all facts a reasonable insurer could look upon as being material not including what the insured actually believed to be material (i.e. in acting honestly), what a reasonable insured would have believed to be material and what the particular insurer considers material.  With a view to providing a definition, it was recognised in Pan Atlantic Insurance Co ltd v. Pine Top Insurance Co Ltd  that a material fact is one that would impact on a reasonable insurer in assessing the risk – although it is not necessary for it to have a decisive impact on the insurer’s risk acceptance or the premium charged. However, it is only possible for the insurer to look to avoid the policy that is put in place between the insurer and insured in a given case if the material misrepresentation or non-disclosure induced the insurer to enter into the policy.
As for the control of Consumer Credit Agreements, there are various ways in which the Consumer Credit Act (CCA) 1974 (amended by the Consumer Credit Act (CCA) 2006) protects debtors by giving courts powers to extend the period for payment and make consequential orders varying aspects of the specific contract. On this basis, a regulated agreement has been recognised as any agreement falling under the CCA 1974 except for an exempt agreement since the Act also allows the Secretary of State to exempt other consumer-credit agreements where the total charge for credit does not exceed a specified number connecting an outside country. In addition, the CCA 1974 needs those engaged in a consumer credit business, a consumer hire business or an ancillary credit business to be licensed by the Office of Fair Trading (OFT).  But, whilst section 32 of the CCA 1974 serves to regulate the form and content of consumer credit and hire arrangements and the rights and duties of the parties to consumer credit and consumer hire agreements, Parts V and VI of the Act includes the powers of the courts to exercise judicial control with respect to these agreements. By way of illustration, Part IX recognises the courts have powers in certain circumstances to re-open and amend the provisions of consumer credit agreements, including where the agreement is unfair to the debtor.
To this effect, section 129 of the CCA 1974 refers to the extra time the debtor is given to pay back along with the return order that does not give the debtor any time to pay back the creditor. However, whilst, according to the Consumer Credit Bill 2004, the financial limit of £25,000 was removed for the regulation of consumer credit and consumer hire agreements so courts are given a discretion whether to grant an enforcement order  except where the current CCA 1974 provides a court shall not make an enforcement order.  The CCA 1974 requires those engaged in a consumer credit, hire or ancillary credit business to be licensed by the OFT. Trading without a licence is a criminal offence and can result in a fine and/or imprisonment, whilst the OFT also has the power to suspend or revoke a licence. In addition, the CCA 1974 also regulates the form and content of consumer credit and hire arrangements, the rights and duties of the parties to consumer credit and hire agreements and the powers of courts to exercise judicial control in this regard. The courts can reopen and amend the provisions of consumer credit agreements, including where the relationship between the creditor and debtor is unfair to the debtor.
By way of illustration, the speech of Lord Bingham in the House of Lords in First National Bank v. Director General of Fair Trading  contains comments on the use of the courts’ powers to make time and related orders.  In so doing it was recognised in this case “general time orders extending over very long periods of time are usually better avoided” whilst also adding the discretion under section 129 of the Act to the trial judge should not be fettered because “the broad language of section 129 should be so construed as to permit the county court to make such order as seems to it just in all the circumstances”. In addition, it is clear from the case of Southern & District Finance Plc v. Barnes  where a creditor calls in a loan (e.g. by bringing a possession action where the loan is secured on property), the outstanding balance of is a sum owed and the court has power to make time orders regarding future instalments along with accrued arrears.
However, when such an order is made, the court can amend the regulated agreements by reducing the rate of interest payable under it to nil.  Therefore, where a regulated agreement is being enforced and an installment order is made this means that there will be no court hearing. For example, in Heath v. Southern Pacific Mortgage Ltd  where Ms Heath took out a mortgage for over £28,000 on her home, £19,000 of which was used to discharge an earlier mortgage and the remainder was used for other purposes. When Ms Heath defaulted on the new mortgage, and accrued arrears, the lender claimed possession and the loan appeared to escape the requirements of the CCA 1974 because it exceeded £25,000. Ms Heath appealed against a possession order and argued the Act applied because the loan had two discrete parts or purposes – each valued at less than £25,000 – but the High Court rejected that argument and upheld the possession order. With this in mind, the 2002 mortgage was not properly executed under Section 61 of the CCA 1974, and the Court has no power to enforce it under section 65 of the Act since no document containing all the prescribed terms was signed by the Appellant,  that was confirmed by the House of Lords. Therefore, although section 127(3) of the CCA 1974 was later repealed by section 15 of the CCA 2006, this did not affect improperly-executed agreements made before the repeal came into force.
In conclusion, it is clear that both insurance and consumer credit agreements not only recognise the consumer as having legally enforceable rights before the courts but also those that are looking to underwrite such agreements. However, whilst it is arguable that, on the basis of the discussion already undertaken, the recognition of the rights of the insurer and insured is arguably in favour of the insured with regard to the making of an effective policy, it is arguable that those that take out credit agreements are having the recognition of their rights enhanced. The reason for this is that, in the wake of the amendments made to the CCA 1974 via the CCA 2006, consumer credit agreements have come to be recognised as increasingly more favourable to the consumers themselves. This is effectively illustrated by the fact that, according to decisions like Heath v. Southern Pacific Mortgage Ltd  reached by the courts, there is a need for an agreement to be put into place effectively otherwise it cannot be relied upon either of the parties in the circumstances as they prevail on the facts as they stand. Reflecting back upon the insurance contracts, it is arguable the insurer is favoured over and above the insured because, whilst the insured must be protected, the remit of a given agreement is focussed upon the material facts the insured provides and they will be held accountable in terms of liability if what they provides turns out to be a misrepresentation. 
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