James Walton writes for Banking Risk & Regulation on the case of Waller-Edwards v One Savings Bank Plc and the so-called “Etridge Protocol”
Earlier this month, the Supreme Court ruled that car dealers owed no fiduciary duty to customers. Described as a landmark ruling, justices rejected the argument that undisclosed commissions automatically amount to a ‘bribe’, a big win for car finance lenders. But whilst the financial services world has been fixated on this case, a quieter but equally consequential judgment has slipped under the radar.
In Waller-Edwards v One Savings Bank Plc, the Supreme Court significantly extended the scope of the so-called “Etridge Protocol” - a framework established in 2001 to protect vulnerable individuals from being unduly influenced into lending transactions. The new ruling broadens when lenders must ensure that borrowers receive independent legal advice - a shift that could have major implications for banks, building societies, law firms and advisers involved in lending transactions.
For those less familiar, the Etridge Protocol stems from the 2001 case Royal Bank of Scotland v Etridge (No 2). It established that where a lender is put “on notice” that one party to a loan transaction might be under undue influence - typically in cases where one spouse acts as guarantor for the other - that lender must take active steps to protect them. Most notably, the borrower must be advised independently and in private by a solicitor who explains the transaction and confirms their understanding.
James Walton, Partner in our Banking & Finance team, writes on the ruling, the Etridge protocol, and its implications in an article for Banking Risk & Regulation. He explains:
The financial services sector is rightly focused on the implications of the motor finance judgment. But while that case deals with a particular section of the market, Waller-Edwards could impact a far wider range of lending relationships. For legal advisers, lenders and borrowers alike, this is one ruling worth revisiting, and they will now need to think more carefully about the circumstances in which the Etridge Protocol may need to be followed.
Read the full article in Banking Risk & Regulation here (subscription required).
Read James' longer Expert Insight on the subject on our website here.
