UK Supreme Court Clarifies PPI Claim Time Limits

The UK Supreme Court has ruled that PPI unfair relationship claims can remain within the legal time limit until the wider credit relationship ends, not simply until the final insurance payment is made, in a significant decision affecting how courts assess limitation under the Consumer Credit Act 1974.

The Supreme Court ruled that the six-year time limit for certain PPI claims began when the wider credit relationship ended, not when the final insurance payment was made.

How the Supreme Court Changed the Limitation Analysis

Karen Smith and Derek Burrell both had RBS credit cards with payment protection insurance attached to them, and RBS received large commissions from those insurance policies without telling either customer how much it was making from the arrangements.

Ms Smith cancelled her PPI policy in 2006, although her credit card account stayed open until 2015, while Mr Burrell’s PPI policy ended in 2008 but his credit relationship with RBS continued until 2019.

Both later received partial compensation through the Financial Conduct Authority PPI redress scheme before bringing claims in 2019 seeking repayment of the remaining sums they had paid for PPI.

RBS argued the claims expired years earlier because the final PPI payments had already been made in April 2006 for Ms Smith and March 2008 for Mr Burrell. The Supreme Court disagreed and treated the end of the wider credit card relationship as the point where time started running, meaning the claims were still brought within the six-year limitation period.

Where Risk First Appears

The judgment confirms that legal exposure in unfair relationship claims is not necessarily confined to the timing of disputed PPI payments. The court focused on the wider creditor-debtor relationship and whether unfairness continued throughout that relationship. Lenders defending historic claims may therefore need to examine continuing account relationships rather than isolating individual transactions or policies.

The Supreme Court said the six-year limitation period only started once the wider credit relationship ended, not when the last PPI payment was made.

That distinction could affect more than historic PPI claims. Credit cards, loans and insurance products often sit inside longer-running banking relationships, meaning claims tied to older products may still remain in time years after the product itself has ended.

Why the Court Said the Relationship Was Still Unfair

RBS argued that any unfairness ended once the PPI policies were cancelled. The Supreme Court disagreed.

In Ms Smith’s case, the court said the relationship was still unfair after her final PPI payment because RBS had not repaid the money she had spent on the policy and still had not disclosed the commission it received from those payments.

The judges treated that continuing lack of disclosure, together with the unresolved financial impact on the customer, as part of the relationship between the bank and borrower even after the insurance policy itself had ended.

How Exposure Escalates

Exposure may increase where firms continue wider credit relationships without resolving disclosure deficiencies or remediation issues connected to earlier products or transactions. The judgment indicates that courts may examine whether unresolved informational imbalance or outstanding financial consequences continued affecting the overall fairness of the relationship.

Sections 140A to 140C were added to the Consumer Credit Act 1974 in 2006 and replaced the old “extortionate credit bargain” rules with a wider test based on whether the lender-borrower relationship had become unfair.

Lord Leggatt said courts are entitled to look at the full history between the bank and customer, which mattered here because the credit card accounts stayed open years after the PPI policies had ended. Courts can order repayments or other remedies if they decide the relationship was unfair.

Governance and Compliance Consequences for Lenders

The ruling means banks and lenders may still face claims years after a PPI policy or related product has ended if the wider customer relationship continued running.

In cases where disclosure problems, complaints or compensation issues were never fully resolved, courts may look beyond the original sale itself and examine how the lender dealt with the customer relationship over time.

The Action Threshold

The judgment indicates that legal risk may become more difficult to contain where historic disclosure issues remain unresolved within an ongoing credit relationship. Firms defending unfair relationship claims may therefore need to assess not only the original transaction, but also whether later conduct addressed or continued the alleged unfairness.

The decision may also be relevant in future disputes involving hidden commissions, insurance sold alongside credit products, and other long-running lending relationships where customers say key information was never properly disclosed.

Throughout the judgment, the Supreme Court focused on the overall relationship between lender and borrower rather than treating each payment or product as a separate issue.

The Case’s Impact on Future Lending Disputes

The Supreme Court’s reasoning may surface again in disputes involving loans, credit cards and other consumer finance products tied to commissions or insurance arrangements.

The judges looked at the relationship between the bank and customer as a whole, including what happened after the insurance policies ended. That means future claims may not turn only on a single payment or product sale, especially where customers argue they were never fully told about commissions or were left out of pocket for years afterwards.

Broader Litigation Signal

The broader significance of Smith and another v Royal Bank of Scotland Plc lies in the Supreme Court’s emphasis on assessing the fairness of the creditor-debtor relationship as a whole.

The case may be used in future disputes involving hidden commissions, insurance sold alongside loans or credit cards, and other long-running lending relationships where customers say key information was never properly disclosed.

The Supreme Court looked at the overall relationship between the lender and borrower rather than treating individual payments or products as separate disputes.