A landmark legal decision by the Supreme Court has led to the City watchdog’s consideration of new rules for Payment Protection Insurance (PPI) Claims.
The decision came from the case Plevin vs Paragon Personal Finance in which Susan Plevin, a 59 year old college lecturer, was charged an upfront premium of £5,780 on a loan of £39,870. It was uncovered that 71.8% of this premium was commission, with Paragon taking £2,280 and the broker LLP Processing, receiving another £1,870. The failure to disclose this commission fee, the Supreme Court said, was a breach of the 1974 Consumer Credit Act, meaning that the sale was deemed unfair. The FCA responded to the ruling, implying that the non-disclosure of commission could be another route of financial mis-selling for which consumers could be compensated:
“The FCA is considering whether additional rules and / or guidance are required to deal with the impact of the Plevin decision on complaints about PPI.”
This news will not be gladly received by the banks and other companies who have already paid £18.8bn (including Administration costs) in compensation on over 9m policies since January 2011, with the total cost thought to have already reached £24bn (including Administration costs). Despite this, the FCA continues to look into the handling of PPI complaints, wanting to ‘revamp’ the PPI rulebook in order to:
“Meet its objectives of securing appropriate protection for consumers and enhancing the integrity of the UK’s financial system.”
The FCA plans to report back this July, when the next PPI update is expected.
The Guardian – ‘Banks face bigger PPI mis-selling bill as regulator considers compensation rules’ – 27.05.15
The Telegraph – ‘Legal ruling could pave way for new wave of PPI Claims’ – 27.05.15
London Evening Standard – ‘PPI ruling may trigger a landslide of fresh mis-selling claims’ – 28.05.15