PPI ruling may trigger fresh mis-selling claimsPPI mis-selling has already cost banks an estimated £24 billion

28 May 2015


The final bill for the payment protection insurance (PPI) mis-selling scandal could jump under a move announced by City watchdogs.

The Financial Conduct Authority (FCA) said yesterday it will consider whether people can reclaim money if brokers or others who sold them policies didn't make clear they were earning commission.

The decision follows a ruling by the Supreme Court late last year which may have wider implications for PPI complaints.

Depending on the outcome, it could result in more customers being eligible for compensation.

You can use our free online tool to claim mis-sold PPI compensation.

Upfront PPI premium

The case - Plevin v Paragon Personal Finance Ltd - centred on a woman who took out a PPI policy on a loan through a broker.  

Unknown to her, more than two thirds of the premium went in commission and failure to make this obvious was ruled unfair under the Consumer Credit Act 1974.

Susan Plevin, a 59-year-old college lecturer, was charged £5,780 as an upfront PPI premium on a loan. But over 70% of the premium was commission, with credit broker LLP Processing receiving £1,870 and lender Paragon getting £2,280.

Lord Sumption ruled that failing to disclose commissions led to a 'sufficiently extreme inequality of knowledge and understanding' and that there was a 'tipping point' in that inequality. He did not stipulate what the tipping point was, but said this case was 'a long way beyond it'.

£24billion - and counting

The mis-selling of PPI has already cost banks and other financial firms more than £24billion.

The industry had been hoping the end was in sight, with disputes to the Financial Ombudsman nearly halving in the past year.

However, a new wave of commission-linked complaints could pass the figure even higher.

PPI compensation review

The FCA review, which kicked off in January, is already looking at the possibility of introducing a time limit on complaints about PPI.

Which? executive director Richard Lloyd said about the FCA review: 'It's good that the regulator is finally checking up on how banks are handling the PPI complaints scandal.'

In January 2013, banks tried to persuade the Financial Services Authority, the FCA's predecessor, to set a deadline of April 2014 for people to claim compensation.

The FCA will announce the results of its review in the summer.

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