After the judicial review of 2011, in which Financial Conduct Authority (FCA) won the case against banks in the misselling of PPI policies, the demand for claims skyrocketed. Consequently, up till now more than 26 billion pounds have been paid by the banks as compensation for customer who were a subject to a missold PPI policy.
While the demand for PPI claims may have died down in recent years a recent court ruling could potentially add another 33 billion pound windfall to customers’ pockets.
What is in question now is the commission taken by brokers and branches on fairly sold PPI policies. This was not initially noted in the first round of claims – where only payments made on a missold PPI policy were counted for compensation. With the addition of the commission factor, insurances that were even opted for by buyers themselves can be termed as missold. In other words, if your initial PPI claim was rejected by the bank, and if this ruling goes against the banks, you may be able to get compensation.
The legal basis
The legal basis for this case is the breach of the 1974 Consumer Credit Act. The act mandates that disclosure of the level of commission and who it is going to, is required. Many banks didn’t pay heed to it and pocketed commissions in excess of 50% on the PPI premiums without informing the customer.
The Supreme Court case on which this new potential windfall centres on is that of Susan Pelevin vs. Paragon Personal Finance. The ruling went in Susan’s favour after she was charged a PPI premium of £5,780 on a personal loan – a whopping 71.8 percent of which was undisclosed commission. Thus, her bank breached the Consumer Credit Act, by not informing her how much commission she was being charged, and who the commission was going to.
If the Financial Conduct Authority extrapolates the Supreme Court case to all legally sold PPI policies, then customers of all of UK’s big 4 banks may be affected. This means that even if you were knowingly paying for a PPI policy, you could be entitled to a claim. This can lead to a potentially huge windfall for consumers, which can amount to 33 billion pounds, or more according to independent analysts. And act as another heavy blow for the banks which are still reeling from the initial PPI fiasco.