When you take out a loan or credit product, you expect absolute clarity. You deserve to know who’s in charge of your account and who’s benefiting from your situation.
When people borrow money, they know that it’s not given as a form of charity with only their interests in mind. When you borrow, you know that the lender is getting something out of the agreement. When you pay your loan back, interest has been added, so the transaction works in someone else’s favor. You’ll pay back more than you borrow, and in turn, the lender will be making a profit.
What if someone else is involved? Often, these transactions involve a broker or middle-man. Brokers can include price comparison websites. Sometimes, it’s challenging to work out if there’s a broker involved in a transaction.
Brokers connect borrowers with lenders, and lenders usually pay them a commission for sending business their way. Unfortunately, this does mean that these relationships aren’t always in the customer’s best interests. Are you really being shown the best deals, or are you being manipulated into choosing the deal that earns the most commission for the broker?
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The Plevin case took place in 2014. Susan Plevin brought the case against her loan provider and her credit broker. Specifically, Paragon Personal Finance and the credit broker LLP.
In 2006, Mrs. Plevin had taken out a loan. She was told, in addition, to get Payment Protection Insurance (PPI). She took out a PPI policy that, she was told, had a value of more than £5,000 in total.
Unfortunately, Mrs. Plevin later realised that her PPI had been mis-sold. Only around £1,600 had been paid into her PPI plan. The remaining money had been used as a commission payment for LLP and extra money for Paragon. If she had arranged the policy herself, she could’ve saved a lot of money.
Mrs. Plevin hadn’t known that she’d be paying commission, hidden in the cost of her PPI policy. She argued that if she had known, she wouldn’t have purchased PPI. The courts found in Mrs. Plevin’s favor, so she was repaid the commission costs plus interest.
The Plevin case changed the face of lending and borrowing in the UK. It highlighted a common issue, where financial products came with high – and often hidden – commission.
The Financial Conduct Authority weighed in, protecting the rights of consumers. Lenders were told that they had to contact their current and previous customers, telling them that they could be entitled to make a PPI claim. But, the court’s decision went much further than simply affecting Payment Protection Insurance. In fact, if you believe that you’ve been mis-sold commission on any financial product, you may be entitled to claim money back by using the Plevin policy.
The FCA stated that commission was unfair if it made up more than 50% of a transaction.
Many financial transactions involve commission payments. It’s cheaper to go direct, but going through a broker can be beneficial for a variety of reasons. Primarily, using a broker means you can compare financial products from many different providers. As a result, you could find better deals or find the most suitable product. In exchange for this service, you might be willing to pay some additional commission.
The undisclosed commission is a commission that’s hidden or isn’t made entirely obvious. It may be that you haven’t been told that you’re paying commission at all, but more likely, it’s unclear how much of your payment is being used towards commission. You may be happy paying some commission but might not be aware that more than 50% of your payment is covering commission costs.
Though the Plevin case focused on Payment Protection Insurance for a loan, you may have been the victim of undisclosed commission fees for a different financial product. In fact, almost any form of borrowing might have been provided with an undisclosed or mis-sold commission.
You might be entitled to claim compensation if the commission was mis-sold for any of the following products:
Many people pay a commission when they take out a loan. You might have known that you were speaking to a loan broker, but you weren’t clear on the commission costs. Or you might have thought that you were making an agreement directly with the lender if you’ve been completely misled. If the commission wasn’t clearly mentioned within your loan agreement, you may have a case to claim that your commission was mis-sold.
Your loan documents should clearly state if any commission was paid and should tell you exactly how much. If you can’t find this information on your paperwork, you may be able to claim compensation from the lender.
Typically, a commission is mis-sold when loan brokers are involved. Perhaps you found your loan on a comparison website or spoke to a loan broker directly?
When you first applied for a loan, you might have agreed to pay a loan setup fee. This fee should cover administration costs but will also have included commission. In short, you’re covering the broker’s payment for connecting you to your chosen lender.
Loan brokers can provide a valuable service. They make it easier to shop around and find the best loan to suit your needs, but they don’t do this purely for you. Lenders use brokers to reach a wider audience, and they’ll pay when a new client comes on board. Of course, they don’t want to lose out on their profits, and so they’ll take this money from you. Your loan price increases, with additional charges and fees, and the lender then uses the excess to pay the loan broker.
If you’re not aware of how much commission’s being paid, you’re dealing with an undisclosed commission. It isn’t enough to simply be told that fees or interest payments are charged. You should know exactly how much money is being paid to the broker.
As well as paying commission to a broker, lenders can use a variety of tactics to make their own additional profit. They may keep some of any loan setup fee or administration charge that they might issue. You deserve to know exactly where your money’s going and exactly how much is being put towards the loan you’re paying off.
Just as they do with other forms of credit, many people use brokers to find the best deal on a credit card. You might use a comparison website to see which credit cards you’ll be approved for or to see how much interest is charged and find the best interest-free periods. If you use a comparison website, you’re likely to apply through a broker.
You can avoid commission costs by going direct, like asking your bank for a credit card. Some people prefer this route, but the reality is that it limits your options, and you might not find a suitable product.
You may be willing to pay some commission for the convenience of using a broker, but you must be told exactly how much of your money is being used to pay commission fees. If you have a credit card and you aren’t sure whether you paid commission, especially if it is from a niche lender rather than a high street bank, it’s worth checking your paperwork in your initial agreement.
Brokers can help you get the best deal on mortgages. In a vast majority of cases, they’ll clearly state exactly what fixed fees you’ll be paying. Most mortgage lenders are larger businesses that you can trust to act lawfully, so it’s unlikely that you’ll discover undisclosed or mis-sold commission. Still, it’s always best to be careful.
Your mortgage agreement should clearly state a list of your fees and charges, including any broker commissions.
Many people apply for catalogue cards, and usually, this is a direct transaction between a shop and its customer. You might be asked at the store checkout if you’d like to sign up for their store card. If that’s happened to you, it’s very unlikely that there will be any mis-sold commission. However, there’s still a chance.
Sometimes, store employees or outside agencies are paid a commission for store card signups. You might have felt like someone in-store was pushing you to sign up for a store card. Many store employees aren’t financial experts and might not be clear about what’s being offered – their only goal is to get you to sign up, so they can receive their commission. If you find out that you’ve paid someone’s commission and the fees weren’t clearly disclosed, you might still be able to make a claim and get your money back.
Home shopping accounts, a lot like store cards, are usually offered direct. You’re given a credit limit; then you can spend in-store or online until this limit is reached. Just like with store cards, there is a small chance that mis-sold commission was involved.
If you believe that you’ve been the victim of mis-sold or undisclosed commission, you could be entitled to get money back by making a Plevin claim. You’ll need to be the account holder or their legal representative, and you’ll need to be able to demonstrate how the commission was mis-sold clearly – either that you weren’t aware of it or that it wasn’t clear how much was being paid. Make sure you have any relevant documents to support your claim.
You’re more likely to have a successful claim if the financial agreement is still active or if you finished paying within the last few years. The longer you take to claim, the less chance you’ll have of success. Despite this, there are no actual restrictions in place. There’s nothing to stop you from attempting to claim for a historical financial transaction, and in fact, most mis-sold commission cases happened before 2008.
The rule is slightly different with PPI. Since the FCA launched a big campaign to make customers aware of mis-sold commission, and since lenders and brokers had to contact their customers and make them aware of the issue, the Financial Conduct Authority chose to apply a PPI deadline. The deadline for claiming for mis-sold PPI was in August 2019. Exceptional circumstances may be considered, but most people can no longer claim for mis-sold PPI.
You’re unable to claim for no financial products, but you will need to prove that commission was paid and that the commission was mis-sold. You need to be able to show that you were unaware of the commission or that you weren’t made aware of how much was being paid.
You can’t simply claim for any product that you’ve paid any commission on. In most cases, the terms of your financial agreement will make all commission payments clear, which would been that you’ve been sold them correctly, even if you hadn’t taken the time to read the details yourself.
If you’re planning to claim for a mis-sold commission, there’s a standard process you should follow.
First, check if it was clear how much commission you’d be paying. Ignorance isn’t a valid reason to claim, so it’s considered to be your fault if the documents were clear, but you didn’t take time to read them properly. Even if the details are buried within a large amount of terms, you can’t claim that it was unreasonable for you to read everything in full. For a claim to be successful, you’ll need to be confident that documents don’t mention the value of any commission.
If you still want to go ahead, the next step is to contact the lender. You can write a letter to claim financial compensation. Your lender should look into your claim and make a plan to compensate you for any financial loss. This compensation should include a refund of any mis-sold commission, plus any interest that you would have accrued if you’d been able to keep and save this money.
If you’ve contacted your lender or your broker, and they’ve not dealt with your complaint, the next step is to contact the Financial Ombudsman and ask them to address the issue for you. The Financial Ombudsman should deal with your claim on your behalf if you can’t get an answer. You can also ask them to step in you feel that the response you get is unsatisfactory and unfair, but again you should be prepared to show why. If you don’t have supporting evidence, your case will be dismissed very quickly.
Solicitors can help with mis-sold commission claims, and you might want to use one if you’re not feeling confident and don’t want to claim on your own, but for something of this level, they’re not essential.
There’s nothing to stop you from writing a letter to a lender or broker on your own. Just make sure that you have a strong case and evidence of mis-sold commission.
If you want to seek support from a solicitor, they may be able to check that your complaint is a valid one. However, they could charge a lot of money for this service when you could do the same without their help.
If you are convinced that you have a case and your own letter is ignored or rejected, you could speak to a solicitor, or you might prefer to contact the Financial Ombudsman instead. The response will likely be slower, but you won’t have to pay extra. It depends on your own priorities.
Just like solicitors, claims management companies will charge money for a fairly easy task. You could choose to use a claims management company if you simply don’t want the hassle, but this usually means that a claim is less worthwhile as compensation will be spent on their fees.
Often, claiming for a mis-sold commission is as easy as sending a letter. You can even find several templates online, so you don’t need to write it on your own. If your case is a valid one, your lender should pay the money back without putting up a fight. Often, any outside help that you pay for is an unnecessary cost.
To maximise your chance of a successful claim, you should contact your lender or broker within six years of the financial agreement being active. Your claim may still be successful after this time, however.
More recent financial agreements are unlikely to include undisclosed commission, as companies have learned from the PPI scandal and the Plevin case and are more careful. Most mis-sold commission is from older transactions, so it’s worth looking over any old financial documentation.
If you have a valid claim, it can take a few weeks for the case to be examined before a compensation offer is made. If you aren’t happy with the response or you haven’t had a satisfactory reply, you’ll have six months from your initial contact to speak to the Financial Ombudsman to ask for them to support you.
If you’d like help from a claims management company, you can ask them to look into your case and contact lenders on your behalf. They’ll typically charge a fee for this service, but you might prefer to pay this fee and save your own time and effort.
To get help from a claims management company, you’ll need to provide them with the documents you received when you borrowed the money. They’ll need to see that commission was mis-sold or undisclosed so that they can start your claim.
Not only can you make a claim on your own, but in most cases, you should. Making a claim is relatively simple, as long as your case is a strong one, and often it’s as easy as sending a letter to your lender or broker. With templates online for mis-sold commission claims, there’s nothing to stop you from making your own claim and keeping all the compensation to yourself.
If you use outside help, like a claims management company or a solicitor, you’ll be expected to pay for their services. Of all the legal claims, this is one of the easiest to manage without additional support, but the option is there if you really don’t want to handle it yourself.
If you want to make a compensation claim alone, there are no fees and charges involved. You can send a complaint to your lender by post, and they should look into it for you. There are lots of free templates you can find online, so you don’t even need to write your own letter.
If you make a claim for mis-sold commission and the lender doesn’t respond, or if you’re unhappy with their final response and feel that you still have a case, you can escalate to the Financial Ombudsman for further investigation. Again, this is a free service.
If you want to get help from a solicitor or a claims management service, they’ll typically help on a No Win, No Fee basis. It’ll cost you nothing to start your claim, but they’ll take a percentage of your compensation once your claim is complete. Solicitors will only take on your claim if they feel that there’s a chance of success, and they should let you know up-front how much they’ll be charging at the end.
The amount of compensation you receive will depend on several different factors. You should receive the mis-sold commission, along with an interest payment. The compensation should put you back in the same position that you’d be in if you’d never paid it, so the interest payment should cover any interest you’d have earned if you’d kept hold of the money.
The absolute maximum that the Financial Ombudsman will compensate is £355,000, though most compensation payments are, understandably, nowhere near this amount.
For a £10,000 loan or credit product, you could probably reasonably expect to receive around £500 in compensation.
You can’t claim twice for mis-sold commission. If you’ve already received some money back in the past, you won’t be able to make any additional claim. Aside from that, as long as you have a valid claim, there’s nothing to stop you.
You may be required to report a successful claim for mis-sold commission. This allows regulatory bodies to carry out their own investigations.
You don’t need to report your mis-sold commission claim to the Financial Conduct Authority – they aren’t involved in consumer complaints at this level.
You may need to contact the Financial Services Compensation Scheme (FSCS) if the lender or broker that you want to claim against has since gone out of business, but you still believe you are owed compensation.
In order to make a successful claim through the FSCS, the lender or broker must have been authorized by the Financial Conduct Authority or Prudential Regulation Scheme. You are unlikely to receive full compensation using this compensation scheme but should at least be able to claim some money back.
If you’ve tried to make a claim but you’re unhappy with the response that you’ve received from the lender, you can contact the Financial Ombudsman and ask them to investigate further. You don’t need to contact them if you’re happy with how your claim has been managed. You’ve six months from your initial claim with the lender to speak to the Ombudsman.
The Financial Conduct Authority set a deadline of August 2019 for PPI claims. If you were mis-sold PPI, it’s probably too late to claim.
Exceptional circumstances are being considered. Your case might be considered if you feel that there’s a genuine reason for missing the deadline, for example, if you were seriously ill.
You could choose to go through a small claims court, which isn’t the same as claiming compensation for mis-sold PPI by complaining directly to the lender. However, you may not be successful, and you’ll likely need to hire a solicitor. This route can be costly, so it’s only worthwhile if you think you’re due a significant amount of compensation, bearing in mind that small claims court has a maximum £10,000 pay-out.
The opportunity to claim PPI compensation has already expired for most people. Unless you started your claim before August 2019, you’re likely to be too late. The Financial Conduct Authority gave plenty of warning, which means that they won’t accept most excuses or reasons for not applying in time.
Some exceptional circumstances may be considered, giving you the chance to claim for mis-sold PPI in a select list of situations. There is, however, a very limited list. If you were severely ill or in a coma, you might still be allowed to apply. You might also be allowed if you feel that the lender intimidated you and deterred you from applying on time, or if a family bereavement made you unable to claim before the deadline. Cases are considered individually by the Financial Ombudsman, and your reason must be very compelling.
PPI claims can result in a significant compensation sum. Some individuals claimed compensation totaling more than £50,000. One couple, in early 2019, managed to claim more than £175,000 between them. Of that compensation, almost £75,000 came from one mis-sold credit card.
Don’t assume that you’ll be due a huge pay-out if you try to claim compensation. You’ll likely receive a lot less, with a £10,000 loan typically resulting in around £500 in compensation.
If you want to claim compensation for a mis-sold commission, it’s very useful to have paperwork to hand. Your paperwork is your proof – it shows not just how much you paid but also whether or not you were made aware of how much commission you were paying.
Making a claim will be significantly easier if you can find the paperwork. Having the original paperwork will also increase your chance of success since it can help to prove you weren’t made aware of the charges.
If you can’t find the original paperwork, any information could help. Old account numbers, or the dates you borrowed money, can help with addressing your claim.
When you contact the lender or broker, give as much information as you can. It’s best not to sound like you’re guessing and taking a chance. Even if you don’t have paperwork, make it clear that you believe you were mis-sold commission and you’re looking to claim compensation.
Lenders and brokers might be a bit tentative, unwilling to share information that you don’t already have, but this could result in you seeking help from the Financial Ombudsman, so, in most cases, they will hand the information over.
If all else fails, access your credit reports with UK credit referencing agencies. They often hold records of your borrowing, so they could provide some crucial information that helps you to make your claim successfully.
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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