Undisclosed Commission Payments
If you have you had a credit card, loan or any other debt product and had Payment Protection Insurance (PPI) then you may be entitled to compensation for undisclosed commission that your bank or building society or other financial institution received from the insurance company when selling you its PPI policy.
Banks and building societies and other financial institutions have a duty to act fairly and in utmost good faith, but have been found out for failing to disclose the fact that they received huge commissions payments and/or a profit share when selling these PPI policies – which were not openly declared to their customer (‘secret commission’). Sometimes the amount of commission that individuals unknowingly paid was extortionate, and amounted to a very significant percentage of the actual cost of the PPI product. So individuals were misled thinking that the monies being paid were for the cost of the PPI cover, but in fact a large proportion was paying for the lender’s commission. According to the Financial Conduct Authority’s review, the typical commission paid to banks or building societies was 67% on PPI – which is a staggering sum.
The law – “Plevin”
In the case of Plevin –v- Paragon Personal Finance Limited, Lord Sumption’s states, “Payment Protection Insurance”, PPI is sold to borrowers to recover the payment of specified borrowing upon the occurrence of an insured event, generally sickness, accidental injury or unemployment… PPI was commonly sold as part of the package with the loan itself, and in those cases usually provided for a single premium to be paid upfront at the time of the transaction and added to the amount borrowed. Commissions payable to intermediaries were high, typically between 50 and 80% of the gross written premium for the policies sold in connection with a personal loan. These levels of commission were much higher than those payable for introducing the loan itself, which meant that a large proportion of the profits of loan brokers was derived from selling PPI policies”.
According to the Judgment, Mrs Plevin borrowed £34,000.00 from Paragon Personal Finance, repayable in instalments over 10 years, and took out a PPI policy for 5 years with Norwich Union. The PPI premium was £5,780.00, which was payable at the outset and added to the amount of the loan, making a total borrowing of £39,780.00. Of the £5,780.00 premium, 71.8% was taken in commissions from the premium. However the amount of the commission was not disclosed. Had Mrs Plevin known what the commission was, she would not have entered into the Loan in the first place. The Court found that the non-disclosure of the amount of commission made Paragon’s relationship with Mrs Plevin unfair and Mrs Plevin won her case and recovered her commission.
However, since the Plevin case, the Financial Conduct Authority (FCA) have issued guidance, which essentially says that if the commission received by the Lender was more than 50% of your PPI’s cost, and the lender didn’t tell you about it, then you should get paid back the ‘top-up’ commission above the 50% tipping point.
So for example: if your loan was £1,000 and £750 of that was commission (ie 75%), then you are entitled to claim back the difference between 75% and 50% ie £250 (or 25%). The Banks and Lenders should ordinarily offer you this sum and you should have received a letter from them inviting you to claim. Indeed, we hear that in excess of some 2 million letters have been written to various borrowers throughout the country advising them that they may have a claim for undisclosed commission. By receiving such a letter, the banks and other lenders have effectively admitted liability to pay you ‘Plevin’ compensation. That is just the beginning!
However, if you want to try and recover more than the commission that is being offered over the 50% tipping point, then we believe that the only real recourse is to go to court to argue the issue. Unfortunately, unlike ordinary PPI mis-selling cases, where you can basically write a letter of complaint and generally wait for your compensation cheque to arrive in weeks, we feel that this is not something an individual can do easily in person.
Individuals may find this a daunting process, as they will have to know the relevant provisions of the Consumer Credit Act 1974, but moreover they will be embarking upon litigation, needing to draft the Court proceedings and take on the might of the Lenders and their appointed legal teams. It is anticipated that the Lenders will fight these claims vigorously through the Courts to defend the principle that they only have to pay you any commission over the 50% offered.
Farley Dwek have the knowledge and expertise of the Civil Procedure Rules and can help individuals to challenge the banks and building societies and seek justice.
Am I eligible to claim?
If you have already received your compensation for your mis-sold PPI policy then you cannot reclaim commission as well as the PPI offer is deemed to have included undisclosed commission.
Therefore to be eligible to make a claim, you have to have your PPI claim rejected by your bank or building society; or been to the Financial Ombudsman Service and been rejected; and/or received a ‘Plevin’ offer from your lender in excess of the 50% tipping point (for commissions received to make an unfair relationship).
The FCA have indicated that if you want to claim more than 50% of the commission back from a PPI policy, then they will need to go to Court. That’s where Farley Dwek Solicitors can help.
What can I claim for?
In principle, you can claim for:
- The commission element over the 50% tipping point
- Repayment of the full PPI premium (which includes the above)
- Contractual interest paid
- Statutory interest on the above
How can Farley Dwek Solicitors help?
At Farley Dwek Solicitors, we aim to provide legal services to help you attain more compensation than has just their Plevin offer that should already been offered by the lender.