When Mrs Plevin took her case to the Supreme Court in 2014, an important precedent was set – where a Lender has not disclosed the amount of commission paid for arranging a Payment Protection Insurance (PPI) policy in relation to a credit agreement, this can create an unfair relationship. The Court placed emphasis on the amount of commission; Mrs Plevin paid a total of 71.8% of her PPI premiums as commission. The outcome of the case provided legal recourse for Mrs Plevin but also provided much needed recourse for others who were unaware that their PPI premiums were going towards a commission payment. Since 2014, the principles laid out have been put to the test by law firms such as The Claims Guys Legal. We have come a long way since the judgment in Plevin v Paragon and there have been some crucial legal developments: not least, how much commission needs to be paid to create an unfair relationship?
Not necessary or appropriate – Brookman v Welcome Finance 2015
In the Brookman case, Mr and Mrs Brookman had entered into three sequential credit agreements with Welcome Finance, each agreement consolidated the one prior. PPI was taken out by the Brookmans in relation to the first and second agreement, the cost of the policies being added to the credit agreements upfront. A commission of 45% was paid to Welcome Finance as an upfront commission, and they subsequently received a further profit share of 44.25% of all premiums paid. The Court held, that the failure to disclose the commission to the Brookmans created an unfair relationship. However, importantly, the Court further stated that it was not necessary or appropriate to identify a threshold that commission payments must reach to make the relationship unfair; instead stressing that this must be decided on a case-by-case basis. In this case, the Court awarded a refund of all premiums paid that exceeded the approximate costs of a ‘pay as you go’ monthly policy, which would have cost the Brookmans less overall.
Introducing the tipping point 2017
The Financial Conduct Authority (FCA), the Regulator of financial services businesses, put rules in place for Lenders regarding PPI Claims in 2017. The rules came after a period of consultation and reflect the impact that the Plevin case had on the PPI industry. The first major development was the introduction of a two-stage test for Lenders to follow when handling PPI Complaints: PPI Complaints had to be investigated for the actual mis-sale (step one) and then assessed to see if commission payments had created an unfair relationship (step two). However, in doing so, the FCA stipulated that an unfair relationship was only created where a Lender earned commissions over the threshold of 50% of the total PPI premiums; this is sometimes referred to as the ‘tipping point’. The FCA also made clear that only commission payments over the 50% threshold must be refunded. If applied to the Plevin case, this would have meant that Mrs Plevin would only have been refunded 21.8% of the commission paid.
Far from satisfied – Doran v Paragon Personal Finance 2018
In the Doran case, a recent application of the Plevin principle, Manchester County Court mulled over the issue of how much commission should be refunded. Within its judgment, the Court stated: “I am far from satisfied that the figure of 50% of the premium used in the calculation of compensation reflects a proper figure for commission…”. The decision in Doran is an important one, in that the Court rejected the FCA’s approach and instead decided to award a full return of the PPI premiums paid.
The argument as to deciding the ‘tipping point’ is far from over and we anticipate that this will remain a hotly disputed issue within the Courts. Here at The Claims Guys Legal, we believe you should be able to reclaim all the commission your Lender received from the sale of your PPI policy – and not simply payments above the 50% ‘tipping point’. We believe that this is the only fair outcome to remedy our Clients. This is why we use our expertise and experience of Claims, under the Plevin ruling, to help our Clients, issuing Court proceedings where necessary to ensure that a fair outcome is received. If you want to find out more, please click here. If you want to make a Claim, you are not sure if you are eligible, or you just want to find out more, please contact us.