Hidden commission claims

Banks could soon be hit with another huge bill for financial compensation in the wake of a new court case focusing on hidden PPI commissions

The Plevin vs Paragon Personal Finance Supreme Court ruling could open the door to further claims for compensation

PPI providers may not have informed customers that a large portion of their premium was being paid out as commission

 

Plevin vs Paragon Personal Finance

  • In November 2014 the Supreme Court ruled that undisclosed commissions on a PPI policy purchased by former college lecturer Susan Plevin were in breach of the Consumer Credit Act 1974
  • The court rules that the relationship between the lender and the borrow was unfair as a result of the lack of information provided regarding the commission payment
  • It was discovered that the client was notified that commission would be paid yet the amount or destination of the payments was not disclosed
  • In this instance the commission rate was more than 70 per cent of the clients PPI premium (72% of £5,780)
  • The case was the first of its kind and has forced the Financial Conduct Authority (FCA) to rethink the rules on PPI compensation and to decide if all similar commissions should be paid back to consumers
 

What are PPI commissions?

  • Essentially, if you purchased PPI and the product was provided by a third party, the provider may have been paying commission for the sale taken from your premium payments
  • If the seller didn’t inform you that they your money was being spent on this commission, they could be in breach of the 1974 Consumer Credit Act
  • The FCA is currently assessing whether to change the guidelines on dealing with complaints as a result
  • If they decide that money is owed to consumers, banks could be looking at an even bigger PPI bill
  • It remains to be seen whether the FCA will take the Plevin case into consideration for other financial products with undisclosed commissions such as car finance or store cards
 

The inside track

  • PPI has cost the banks in excess of £24bn to date
  • Tens of billions more could be paid out if the FCA decides that customers are due repayment
  • The case adds to increasing pressure placed on PPI sellers as potentially millions of buyers have been rejected after complaining
  • Last August the FCA ordered that 2.5m complaints be reopened after found evidence that complaints had been wrongly rebuked or that too little compensation had been repaid
  • The Plevin case will add further pressure on PPI providers as many of these people have already been rejected
  • If you feel that you’re owed PPI redress you can find out how to get your money back using our 1 Minute Guide to PPI Claims
 

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