Manchester County Court ruled that a couple should get back all the commission they paid to a credit broker for their PPI policy because it wasn’t disclosed to them when they took out the loan.

The total commission paid by claimants Christopher and Joanne Doran was £7,985.46 – 76% of the premium paid by the couple.

The Financial Conduct Authority previously said people could receive compensation if the level of commission exceeded 50% of the total cost of the premium.

This guidance was issued following the ‘Plevin’ case – a landmark ruling – which said that non-disclosure of commission rendered the credit relationship between the parties unfair.

This meant that where someone paid more than 50% in commission, say 70%, they would receive compensation equivalent to the difference between the commission level of 50% and the actual commission. In this example, the compensation would amount to 20%.

But the Doran case means the couple will receive the full amount of compensation, not just an amount above the ‘unfair’ 50% mark as given in the FCA guidance.

Elis Gomer, commercial barrister at St John’s Buildings, said: “Mrs Doran gave evidence that she would not have taken out the policy at all had she known about the commission level.  Accordingly, the judge ruled she should be awarded the full amount of the premium in damages.

“This judgment – while not binding on other courts – is likely to have far-reaching significance, showing not only that the faulty FCA guidance is not legally binding, but also that it is a castle built on sand. If claimants challenge it, they could be repaid in full – at a potential total cost of up to £18bn to the banks.”

Regular premium PPI complaints

Separately today, the FCA issued a consultation paper on new guidance about the handling of regular PPI.

It is looking to clarify its guidance relating to commission disclosures not only at the point of sale, but suggests firms should have also assessed commission disclosures on an on-going basis.

This means consumers who previously made a complaint about regular premium PPI and had it rejected will be able to make a new complaint to their lender if these proposals are given the go-ahead.

Consumers should consider and decide whether they want to make a complaint before the 29 August 2019 deadline.

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.”

The FCA added that the consultation has no relation to the outcome of recent court cases.