In November 2014, the Supreme Court ruled in Plevin v Paragon Personal Finance Ltd that a failure to disclose to a client a large commission payment on a single premium PPI policy made the relationship between a lender and the borrower unfair under section 140A of the Consumer Credit Act 1974.
If the regulator brings in new regulations based on the case it could open the door to a new wave of fresh claims for compensation, even for those who have already been paid out for being mis-sold PPI.
In 2006 Susan Plevin responded to a leaflet put through her letter box by an independent credit broker LLP Processing Ltd offering to arrange a secured loan.
She called LLP who arranged a £34,000 loan from Paragon Personal Finance over 10 years. It also arranged a £5,780 PPI policy with Norwich Union, payable at the outset of the loan.
More than two-thirds – 71.8% – of that premium was taken in commission, with LLP receiving £1,870 and Paragon taking £2,280. Neither amounts were disclosed to Plevin.
In his judgement on the case, Lord Sumption said that failing to disclose this led to a “sufficiently extreme inequality of knowledge and understanding”, adding that there was a “tipping point” at which commissions became so large it rendered the relationship way beyond it.
As a result of the case, the FCA said it will be engaging with relevant stakeholders in the coming months and will announce its views on this, including next steps, later in the summer.
Banks and other companies have paid £18.8bn in compensation on more than 9m policies since January 2011, with the total cost expected to reach £24bn. The FCA statement could mean we see this bill rise even further.