Not upheld: Debt collection practices complaint against Principal Insurance Limited

Decision detail

Summary

Mr B complained that Principal Insurance Limited improperly passed a disputed balance from a cancelled commercial vehicle insurance policy to a debt collector. Mr B believed the balance should not have been pursued against him, arguing the other driver or their insurer should bear the cost following an accident. While Principal admitted it made an error in failing to adequately communicate with Mr B about the balance before referring it to debt collection firm E after 3.5 years, the ombudsman found the balance was legitimately due under the contract. The ombudsman determined that Principal's remedy of waiving the balance (over £1,000) and ensuring it does not appear on Mr B's credit report was fair and reasonable compensation for the distress and inconvenience caused, and therefore did not uphold the complaint.

The Ombudsman's reasoning

The ombudsman acknowledged that while Mr B's frustration was understandable (believing the other driver should bear the cost), Mr B had a contractual obligation to Principal as the policyholder. The balance was legitimately due under the contract, and any claim against the other driver was Mr B's responsibility to pursue separately. However, Principal did err in its handling by failing to adequately communicate with Mr B about the balance before referring it to a debt collector after 3.5 years. The ombudsman found that the waiver of the balance (over £1,000) plus the assurance it would not appear on the credit report was proportionate compensation for the distress and inconvenience caused by Principal's error, particularly the impact from 2023 onwards when the debt collector contacted Mr B.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website