What Is Plevin & High Commission?
The Plevin rule came into effect on 29 August 2017 and is the result of a case brought by Susan Plevin and decided in the Supreme Court. The purpose of the rule is to ensure that insurance companies are not charging customers high levels of commission when they bought PPI.
The commission was the reward insurance companies gave to banks and lenders as a result of selling PPI to their customers. This meant that if you have PPI, the commission payment comes from what you paid for the PPI policy.
This explains what the commission itself is, but what about high levels of commission? This is taken to mean that if more than half of the amount you've paid for the PPI policy is made up of commission, it is high level of commission.
Plevin Vs Paragon Court Decision Summary
FREE ‘PLEVIN’ PPI CHECK*
Background: The case of Susan Plevin v Paragon Personal Finance 2014 was about a retired college lecturer, Plevin that had been introduced to Paragon by a broker for a loan. The broker had performed a 'demands and needs' assessment for the PPI policy. The business was accepted by Paragon. They carried out money laundering checks but not PPI suitability checks.
The loan was for £34,000 with 7.3% interest to run for 10 years and was regulated by Consumer Credit Act 1974. The single premium PPI policy cost £5780, 71.8% of which was commission.
Action: Plevin claimed as the PPI didn't meet her needs, the PPI was mis-sold to her. She also argued that had she known at the outset how much of the PPI premium was made up of commission she would never have bought it, as it wasn't value for money.
The case reached the Supreme Court in June 2014. The case now looked at the 'unfair relationship' created between her and Paragon under the Consumer Credit Act 1974, because the high commission within the PPI premium hadn't been disclosed.
Outcome: The Supreme Court ruled in Plevin's favour and agreed that she had been mis-sold PPI. They further decided that an unfair relationship existed between Plevin and Paragon because of the undisclosed commission.
The FCA and Plevin
The Plevin ruling has had huge implications for consumers and lenders alike. The Financial Conduct Authority (FCA) had to act and produce some guidance on how PPI matters were to be dealt with and how PPI complaints should be handled.
The FCA determined that if anyone had PPI attached to any active finance from a bank or lender since 2008, they may be owed some money.
Before Plevin, the only way to reclaim PPI was if you had been mis-sold it. However, after Plevin, the FCA set out some guidelines to define what high commission was in this case: if 50% of the cost of your PPI was paid as commission to the lender, and this wasn't made clear to you at the time, you can claim back the extra above the 50%. The reason is because this creates an unfair relationship between the lender and the customer under the Consumer Credit Act 1974 section 140A. The guidelines further outlined how banks should investigate and correct PPI commission.
Are You Eligible For A PPI Commission Claim?
If any of the situations below apply to you, there may be grounds to make a claim:
- Your credit agreement was covered by section 140A of the Consumer Credit Act 1974;
- You weren’t told about the commission that was being charged on your policy;
- The commission paid was more than 50% of your premium with the average commission being charged at 60-70% of premium being paid by most banks and lenders.
What is the Double Recovery rule?
The Double Recovery rule came into effect on 29 August 2017 and is when a customer has already claimed successfully for mis-sold PPI, they cannot later claim again for unfair relationship. This also applies if customers didn't receive full redress.
The PPI Deadline
An announcement was made by the FCA that there would be a deadline for PPI complaints to be submitted by. The date of 29 August 2019 is the last day for people to make their claims by. After this point customers will lose the right make a complaint.
It must be made clear that the deadline applies only to complaints that are made to lenders directly or are referred to the Financial Ombudsman Service (FOS). After the deadline there is still the option of persuing a claim using legal channels and the courts. The downside to issuing court proceedings is the high cost compared to a claim using the FOS which is free.