The mis-selling of Payment Protection Insurance (PPI) was a huge financial issue and had multiple layers to it.
Whilst most complaints were made against the unnecessary selling of policies at all; there were also secondary complaints around commission fees that were brought to the courts and, again, customers were largely found in favour of.
The final changes to the FCA’s Plevin Policy were made in January 2019 and dictated that lenders and brokers must write to thousands of customers informing them they may still have a valid complaint.
Read on to find out more about the origins of the Plevin rulings and the final updates made in 2019.
We update all our guides regularly. If you are researching Plevin and Mis-sold commissions and we haven't got an exact guide that helps you, keep coming back as we update daily.
When you take out Payment Protection Insurance alongside your loan, it is rarely the lender of your loan that provides the actual insurance policy. Instead, they will sell it to you on behalf of a licensed insurer. The loan lender will charge you more than the value of the policy, keeping the additional fund as a commission (in agreement with the insurer) whilst then using the remainder to pay for your policy. It’s essentially a finders fee for arranging your PPI on your behalf.
If your loan agreement was also managed by a broker, then your PPI commission may be split between the broker and the loan lender as both would have a hand in arranging your PPI cover.
However, as with some of the other issues surrounding PPI, it was found that policies were sometimes mis-sold due to the commission not being dealt with fairly. This came to light thanks to the Plevin ruling.
Plevin refers to Mrs Susan Plevin, a loan customer. In 2014 she bought a case against Paragon Personal Finance, a company she had taken a loan with alongside a PPI policy. Her loan was taken in 2006, and at that time she was not aware of how much she was paying in commission as part of her PPI policy with Norwich Union.
She was asked to pay £5,780 for the PPI policy, but later found out that 71.8% of this figure was a commission - £1,870 went to her credit broker LLP and £2,280 was retained by Paragon. Only the remaining £1,630 was actually used to pay for the policy. Mrs Plevin took the case to court, and she won and was refunded the excessive costs of her PPI agreement.
Mrs Plevin had been fully aware that a commission payment would be made, but she did not know how high it would be. She argued that, had she realised how much of her payment was to be retained by LLP and Paragon, she would not have taken out the policy as it did not represent good value to her. The courts agreed and made the judgement that the relationship between Paragon and Mrs Plevin was unfair.
There were two major results of the Plevin case that the Financial Conduct Authority eventually ruled on. They took their time – it wasn’t until 2017 that they made their “final” ruling on the case (although this would be amended in 2019, as we cover below). They stated that customers were able to claim against mis-sold PPI based on hidden commission costs and that lenders and brokers should write to anyone who had previously been rejected for a PPI claim to inform them of these changes.
They also clarified what would be defined as excessive commission. Any instances where a commission was more than 50% of the sum paid would qualify as unfair, and the customer would be entitled to a refund of the amount paid over that 50% mark, along with any lost interest. There were to be a number of successful claims, as the average commission costs used for PPI policies was found to be 67%. This meant thousands of customers were due hundreds of pounds.
It was agreed that the deadline for any mis-sold PPI policies due to commission would adhere to the same deadlines as other PPI claims, ending 29th August 2019 - You can view the full report from March 2017 here.
The FCA accepted feedback on its policy and made a final amendment in January 2019. The main reason for the new guidance was to inform lenders and brokers that there were many customers who may have been rejected due to being out of jurisdiction (too long had passed) or there was previously determined to be no unfair credit relationship because many of them would now be eligible to claim under Plevin.
This was strengthened by the clarification from the FCA that commission considerations were no longer to just centre around commissions made at the point of sale, but also any that were ongoing. Many people paid PPI on a monthly basis rather than upfront and commission fees taken from the monthly fee had previously been disregarded as mis-sold.
The 2019 clarification guidance ensured that these were included and that customers who had paid commission on their monthly fees could still claim it back.
It was estimated, with these changes to the guidance in 2019, that between 70,000 and 150,000 customers would need to be written to by lenders and brokers offering them another chance to make a complaint. The guidance acknowledged that many people would still not claim as they had disengaged with PPI messaging, and would assume they were still receiving the same messages that hadn’t changed even though they had previously been rejected.
It was made clear that lenders and brokers could not be held liable for these customers not reading the letters and not realising there was potentially another option for them to claim, but they had to be able to show that they had written to the customers - You can view the full updated guidance from the FCA in January 2019 here.
The one thing that didn’t change with the revamped Plevin Policy in 2019 was the deadline for any claims to be made. The instructions given to lenders and brokers were that they had to write to customers who may be affected by the end of April 2019 so that customers still had four months to submit a claim. The deadline of 29th August 2019 was not amended and has now passed.
So if you received a letter, but you didn’t act on it, it is highly unlikely that you will now be able to make a claim. You would need to be able to prove exceptional circumstances. This does not include not being aware of the date – the Financial Conduct Authority have already told lenders and brokers that they do not need to consider claims made with this reason alone.
However, if you were seriously ill or underwent a bereavement around the time of the deadline, then you may have grounds for exceptional circumstances. Also, the deadline only applies to policies that were sold before 29th August 2017.
So, if you took our a PPI policy after this date and you feel that it was mis-sold, either because you didn’t need it or the commission fees were not made clear, then you could still claim.
As we mentioned above, the FCA forced all lenders and brokers to write to customers informing them that they may still have a valid complaint regarding the sale of historic PPI policies. When it comes to other mis-sold commission claims the situation can be a little more complicated. You would need to make the lender/broker aware of potential issues and ask them to comment on your findings.
Yes. When pursuing financial compensation on your own, your first port of call should be the lender/broker that arranged the original financial package. You need to ask them about undisclosed commissions which may have impacted the cost of your financial package.
If for some reason they are not forthcoming with the relevant information, then you can get in touch with the FCA and make a formal complaint. The introduction of the FCA to the mix often prompts lenders/brokers to reconsider their initial feedback!
Even some of the more “obvious” claims for mis-sold commissions can become a little more complicated. You will need to provide copies of the original agreement and then approach the lender/broker with your “evidence”.
The vast majority of claims management companies are well aware of the procedure for claiming compensation and will not be distracted by delaying tactics. History shows that compensation awards tend to be significantly higher, with more successful claims, when being led by a claims management company.
If you decide against pursuing compensation on your own, the only real alternative is to employ the services of a claims management company. On reviewing your evidence for compensation, they would likely offer to take on your claim if they believe you have a minimum 60% chance of success.
The vast majority of mis-sold commission claims are carried out on a “no win no fee” arrangement. This effectively indemnifies the claimant from any case costs associated with the claims management company. In exchange, the claims management company will request a “success fee”.
A “success fee” involves an arrangement between the claimant and the claims management company to provide a percentage of any compensation awarded. The average figure tends to be around 25%, although it can vary on a case-by-case basis. For many claimants, the only route to holding negligent third parties to account is via the “no win no fee” path.
Through a mixture of misinformation and ignorance, we can only estimate the number of perfectly valid mis-sold commission compensation claims which have not been pursued. However, there is no doubt that the opportunity to pursue a claim under a “no win no fee” arrangement has been a game-changer for many.
Not only has it resulted in significant compensation awards, but negligent third parties have been held to account, often leading to changes in their business structure and services.
Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for mis-sold financial products and they can do the same for you.
Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.
If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.
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