Whilst it is not introducing any new rules, the Financial Conduct Authority (FCA) is proposing new guidance on how firms should handle payment protection insurance (PPI) complaints that relate to commission on regular premium plans.
The Plevin judgement forced firms to refund commission payments to PPI customers if that commission amount exceeded 50% of the premium, and if the commission amount had also not been disclosed at point-of-sale.
The FCA is now suggesting that firms should assess not only whether they may have failed to disclose commission at the point of sale, but also whether they reminded the customer of the existence of these commission payments on an ongoing basis throughout the course of the policy.
The consultation closes on September 4. If the FCA decides to issue new guidance, it will do so in late autumn of 2018, and firms will be expected to implement that guidance immediately.
The FCA has made it clear that anyone who has had a complaint about regular premium PPI rejected will be able to make a new complaint based on this guidance.
Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:
“This consultation provides guidance on how to ensure fair and consistent outcomes for regular premium PPI complaints. It supports our aim of bringing the PPI issue to an orderly conclusion in a way that secures appropriate protection for consumers and enhances the integrity of the UK financial system.”
Although the FCA has issued new guidance, the deadline for making a PPI complaint remains little more than a year away.
The new proposed guidance was unveiled by the FCA just days after a court decided to award a couple a refund of their entire PPI commission. The FCA responded to the Plevin judgement of 2014 by instructing firms to refund the proportion of the commission that exceeded 50% of the premium, so if the commission was equivalent to 60% of the premium, the consumer would only receive 10%.
However, a judge at Manchester County Court has ordered lender Paragon Personal Finance to refund the entire commission amount on a PPI policy taken out by Christopher and Joanne Doran, not just the amount that exceeds 50%. In doing so, the court has decided that the existence of such a large undisclosed commission payment created an unfair relationship under contract law. In this instance, the commission was equivalent to 76% of the premium.
The FCA has said that it will not be issuing new guidance in light of the judgement, and the Manchester court ruling is not binding on other courts, so at present, it seems unlikely that the ‘Doran case’ will have as big an impact as the Plevin case. Industry experts had suggested that, had the FCA decided to react to the Doran judgement, it could have increased the industry’s PPI compensation bill by as much as £18 billion.
A spokesperson for Paragon 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.”
It should also be noted that the August 2019 deadline will apply only to cases where consumers seek resolution of PPI complaints via the Financial Ombudsman Service. Consumers will still be able to commence formal legal proceedings against PPI providers after that time.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article