The Financial Conduct Authority has delayed an announcement on PPI undisclosed commission compensation that could cost banks a further £30 billion.
Since the Financial Conduct Authority (FCA) first started keeping records in January 2011, banks and other credit providers have paid out more than £20 billion in PPI compensation to credit consumers who were mis-sold payment protection insurance.
However, that figure could be set to more than double if the city watchdog agrees with the Supreme Court decision in Plevin v Paragon Personal Finance that the failure to disclose the distribution of PPI commission was in breach of the Credit Consumer Act.
In Plevin v Paragon Personal Finance, Susan Plevin successfully argued that she would not have agreed to a single premium PPI policy costing £5,780 had she known that £4,060 of the charge was being kept as commission by the broker and loan company that sold her the insurance product.
The implication of the Supreme Court verdict is that anybody who was sold a PPI policy without being given a breakdown of the commission being deducted from the premium will be able to claim PPI undisclosed commission compensation.
This applies to periodic and monthly-paid PPI policies as well as single premium PPI policies; and, as bank employees were paid commissions on their sale of payment protection insurance, will apply to many millions of policies which were otherwise sold in compliance with FCA guidelines.
Insurance experts believe that, should the FCA accept the Supreme Court verdict, there will be a new wave of PPI claims that could cost banks and other credit providers more than £30 billion – mostly due to the interest charged on single premium insurance policies over the lifetime of a loan.
The key question that needs to be answered is whether or not the failure to disclose commission payments on PPI policies was in breach of the Credit Consumer Act. If so, the volume of PPI undisclosed commission compensation payments could more than double those overseen by the FCA in the past four and a half years.Read More