The Financial Conduct Authority (FCA) has been investigating a recent Supreme Court ruling and has now confirmed that Firms must look at refunding clients monies where they have hidden or not fully explained Commission pay-outs in relation to Payment Protection Insurance (PPI) Premiums that have been mis-sold. This now opens up a huge can of worms, in that anyone who has successfully obtained a refund in relation to PPI, can now look at further redress, namely some or all of the Commission that has been paid to third parties when the Premium was applied.
The Industry average Commission for Payment Protection Insurance was 67%. The FCA has stepped back from insisting that all Firms should contact their clients and look at refunding monies in relation to Commission. They have suggested however that a figure over 50% of the Premium paid, as a Commission, is excessive and that this is the amount that should be refunded. Therefore, taking the Industry average of 67%, if you have had Commission at this amount then 17% of the Premium that you have already had refunded can also be refunded again in addition to interest and compensatory interest. However from our experience, various Firms may also look at further redress, namely a refund of a further level of the Commission that was paid (or even all of it). Many Firms wish to just dispense with the argument and get rid of the complaint so it does not become uncontrollable, as with the PPI mis-sale debacle.
The Court ruling related to a Supreme Court hearing between Mrs Plevin and Paragon, whereby Mrs Plevin was successful in obtaining a refund and redress in relation to the PPI prior to the hearing. However, it became apparent during their investigations that the client had paid a large Premium and the Court ruled that this was inappropriate and unfair and against the Consumer Credit Act guidelines. As such, the Court ruled that any amount which was charged at an unfair level should be refunded. As this was a Supreme Court ruling – it cannot be challenged. Following this the FCA undertook a review which has provided guidance as to what they deem to be fair and unfair.
Whilst the refunds are likely to be significantly smaller than the initial PPI refunds, they still represent a refund, and one that should be addressed for any client who has had a successful PPI claim in the past.
Between now and the time limit when the Banks are likely to end the PPI claims (although there will still be many in the system) the refund bill is likely to be approximately £40billion. Therefore, using the Industry average refunds in relation to this new scandal, it could easily top £7billion to £8billion for those already successful in obtaining a refund in relation to the PPI.