Plevin v Paragon Personal Finance [2014] – What it means for PPI mis-selling claims

Bank Misselling

In November 2014 the Supreme Court gave judgement in the case of Plevin v Paragon Finance, a case which, amongst other things, concerned the level of commission that banks, lenders and finance brokers received for selling PPI (payment protection insurance) to customers.

The judgement in the case could have massive implications for claiming back PPI with some analysts estimating that it could cost the banks another £33bn in compensation for PPI mis-selling.

The brief facts

In the case, as part of a loan with Paragon, Mrs Plevin was also mis-sold PPI, the premium for which was £5,780, the amount of which was added to the loan. In total, 71.8% of the PPI premium amounted to commission payments from the insurance company to the lender and the finance broker who Mrs Plevin originally contacted. The finance broker received £1,870 commission and the lender £2,280 commission from the £5,780 which Mrs Plevin paid. The case has become a landmark for anyone interested in reclaiming PPI.

Supreme Court Judgment

The Supreme Court held that a failure to disclose that such a large commission was being paid, made the relationship between Mrs Plevin and the lender ‘unfair’ for the purposes of the Consumer Credit Act 1974. The Court held that Mrs Plevin should have been told about the level of the commission within the PPI premium so she could make a properly informed decision as to whether the premium was good value.

As she was not told, the relationship was deemed unfair and Mrs Plevin was entitled to relief under s140B of the Consumer Credit Act. The Supreme Court sent the case back to the Manchester County Court where Mrs Plevin originally began her case. The Court awarded Mrs Plevin the commission payments i.e. 71.8% of the PPI premium as compensation for the breach of the Consumer Credit Act.

What does it mean for PPI mis-selling claims

In practice this means that, as well as arguing that PPI was mis-sold because the policy was not suitable for the customer, it is also possible to argue that the failure to disclose the level of commission means that customers should be compensated as Mrs Plevin was. Given that most PPI premiums contained between 50% – 80% and the Supreme Court concluded that 71.8% was “well beyond” the level that was reasonable, it would appear most PPI premiums – if the level of commission was not disclosed, will be impacted by the decision and thus be open to mis-sold PPI claims.

Hundreds of thousands of PPI mis-selling claims have been rejected as lenders say the policy was suitable or that the sale took place before regulations were in place to govern the sale – now all of these cases could be revisited. Furthermore, new cases that are being submitted should ensure that a claim under the Plevin decision is also brought.

Our Financial Team at TLW Solicitors are experts in reclaiming PPI, having already secured compensation for a host of cases. If you think you might have been mis-sold PPI, contact us today for a FREE evaluation.