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Landmark Plevin ruling could cost banks billions

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A landmark Plevin ruling could mean British banks will have to dish out billions more in mis-sold payment protection insurance (PPI) claims.

The mis-selling scandal has so far cost the UK’s leading banks up to £30bn in compensation. The new ruling could mean the PPI nightmare is far from over.

Compensation for commission

The latest case relates to claims made against Paragon Personal Finance. Christopher and Joanne Doran claimed that they were entitled to receive compensation for the excessive commission earned by the provider.

The banking group earned commission amounting to 76 per cent of the Doran’s PPI premium. Consequently, the bank was ordered to pay the full £7,985.46 in compensation.

Ignoring guidance from the FCA

Having to repay 76 per cent of the premium value came as a surprise to Paragon Personal Finance. The Financial Conduct Authority (FCA) advised that they would only have to pay out 26 per cent.

The FCA advised that only commissions above 50 per cent of the premium value were considered unjust. Banks would therefore only have to pay out the amount of commission above that benchmark.

However, the judge on the Doran case ruled that the entire commission should be repaid including interest. This is rather than just the commission above 50 per cent.

A spokesperson for Paragon Banking Group said: “We believe this decision is at odds with other cases heard recently and does not create a precedent. The Doran case is one of a handful of legacy cases for Paragon and we are considering our position regarding appeal.”

The Plevin ruling

The recent influx of commission claims are related to an earlier landmark court ruling known as Plevin. The rule states that customers can now claim back money if more than 50 per cent of their PPI payments went through as commission and this information was not disclosed upon taking the policy.

The average commission banks were paid was 67 per cent. This means millions of people who were sold PPI could be entitled to compensation.

The case opens space for a renewed claims frenzy. The Plevin ruling suggests that even if the PPI policy was not mis-sold, customers could still reclaim due to excessively high commissions that were paid out.

If your PPI claim was rejected, you may be able to complain again. Click here for more information.  

If you think your provider may have taken too much commission on your PPI, you may be able to claim for compensation. Get in touch with one of our solicitors who can advise you on what to do next.