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Second wave of PPI claims on the horizon

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Millions of people could be eligible for Payment Protection Insurance (PPI) payouts despite last year’s deadline.

The deadline to submit a PPI complaint fell in August 2019 with an estimated £38bn paid out to consumers who were mis-sold a policy.

But a series of court rulings have found the products were ‘unfair’, particularly in respect of the commission element of policies.

According to a report in The Sunday Times, undisclosed commission earned by banks from insurers made up more than 95% of the cost of the policy in the most serious PPI cases.

A supreme court ruling in 2014 set a precedent for PPI cases – the Plevin rule. It related to Mrs Susan Plevin who brought a PPI case where it was revealed that the lender, Paragon Personal Finance, made 71% commission on the PPI policy.

She was unaware of this commission at the time of taking the policy and argued this was another form of PPI mis-selling. The court found in her favour.

And with any commission over the 50% charge mark being considered ‘unfair’, this meant customers could only got back half the commission the bank was paid.

But with the recent court rulings, judges have awarded far more and experts believe millions of new complaints could be made as a result, including from those who missed the original deadline. It could also apply regardless of whether the products were appropriate for customers or not.

In one recent case, 58-year-old Karen Smith from Cornwall received a refund from NatWest totalling £529.80 which represented a refund of commission over 50% charged on PPI premiums.

She wasn’t aware she was paying commission and after taking the lender to court, she won £1,500. However, NatWest is appealing the decision.

Elaine Walker, head of financial mis-selling, at national law firm CEL Solicitors, said: “It is widely accepted that, as of last August, the deadline for PPI claims has passed. While this is true for the product itself, there is in fact another layer to the scandal surrounding PPI.

“PPI policies were created to protect consumers by helping them to make repayments on credit cards and loans, should they have fallen ill or lost their jobs. However, many people were mis-sold the product, in that they would never have been eligible to claim should they have needed to. For instance, if they were self-employed.

“On top of this initial mis-selling, lenders took a huge commission from the insurance broker, without telling the customer they were doing so. Shockingly, this commission could be worth up to 100% of the cost of the original policy – it is a huge violation of trust between consumer and lender. Had people been made aware of just how much their lender was profiting in comparison to the price of the actual product, they’re likely to have thought twice before going ahead.”

Walker added there are potentially millions of people whose PPI claims were rejected, or who perhaps didn’t put one forward as they felt they benefited from the peace of mind a PPI policy can offer.

“However, these are exactly the people who should now be taking steps to find out if they’re eligible for a Plevin claim. We’re already seeing a number of clients instructing us to press ahead with such claims, with momentum continuing to grow.

“The point to remember here is that the deadline for PPI claims passed almost a year ago – but if you had a PPI policy and were not aware of the commission your lender took at the time, you could now be eligible for compensation. It’s essential that banks are held to account for what is yet another example of consumers being misinformed and mis-sold.”

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