The definition of a ‘business’ can mean different things to different people. In the context of Business PPI claims, a business can be defined as a commercial operation falling into one of the following three categories:
- A business trading as a Limited (‘Ltd’) Company (registered at Companies House)
- A sole proprietor or sole trader
These organisational operations should be distinguished from an individual person, or ‘consumer’. The distinction between businesses and consumers is important for several reasons in the context of PPI mis-selling claims:
The rules and practices for disclosure of information are different for businesses and consumers. Consumers benefit from being able to take advantage of their banks’ pre-claim disclosure procedure, which means that they are able to check with the bank first to see if they had ever taken out a PPI policy before commencing the complaint process. If their bank does not provide this free PPI checking service, the consumer can fall back on submitting a Subject Access Request (SAR) to their bank and find out whether they had ever taken out a PPI policy. This is because the bank has a statutory obligation to provide their customer with this information once requested.
Unfortunately, the pre-claim disclosure procedure described above does not apply to businesses. Subject Access Request rules also only cover sole proprietors and partnerships of less than 4 people, so many businesses will not be able to submit a Subject Access Request to their bank to find out whether they have ever taken out a Business PPI policy. As an alternative to a Subject Access Request, some banks accept a Request For Information (RFI), but as there is no statutory obligation to back an RFI, the business is, in reality, relying solely on the goodwill of their bank to provide any information to them. What information the bank supplies upon receipt of an RFI, and indeed whether it provides any information at all, tends to vary dramatically between banks. So it may well be the case that a business has taken out PPI in the past and could have a genuine case for the mis-selling of the policy, but it will never know this as it is unable to verify in the first instance whether it ever took out PPI. In this instance , he business will need to rely on its own internal records to identify the PPI policy – which could be an issue, particularly if the policy was sold some time ago in the 1990s.
Routes for Dispute Resolution
The other key distinction between businesses and consumers that have a PPI mis-selling complaint is the way that they can get the dispute effectively resolved.
In the first instance, consumers are able to take their PPI mis-selling complaint to their bank, and if they are unsatisfied with the outcome, they can elevate the complaint to the Financial Ombudsman Service (FOS) within six months of receiving a Final Response Letter from their bank. Businesses have the same rights as consumers when it comes to complaining to their bank, but not for FOS. This is because there are eligibility criteria when taking a complaint to FOS. Those businesses that have ten or more full-time employees and a turnover of €2 million (c. £1.7 million) or greater in the year of making the complaint, will not be eligible. This means that many businesses will be excluded from FOS as a route to get their Business PPI mis-selling claim resolved. If a business is unsatisfied with the outcome from their bank, that only really leaves resolution through the court process in order to provide justice. This will not always be a practical option given the costs and risks involved in litigation.
Cause of Action
In order to make a complaint about PPI mis-selling, or indeed any claim, the business cannot be dissolved. This is because the cause of action for the claim lies with the business entity, rather than with an individual director or person associated with the business; even if the PPI policy was taken out in the name of an individual. In order to claim, a business must be actively trading (registered as ‘Active’ at Companies House). Alternatively, if the business is not active but in administration; then a claim may still be made but it will require the consent and co-operation of the insolvency practitioner or administrator. However, it should be noted than any ultimate payment of compensation for the mis-sold Business PPI product will be awarded to the creditors of the company rather than the company directors themselves.
If the business has been voluntarily dissolved, then it will only be possible to make a complaint by reinstating the company. This is typically a straightforward process that may involve some modest administrative fees but will need to be balanced against the potential amount of compensation payable.