PPI, Plevin & The Case of the FCA’s Decisions

September 20, 2017

The FCA has placed a final date for when PPI claimants can recover their PPI premia (August 2019).

In relation to “Plevin”, undisclosed commission and the unfair relationship provisions under the Consumer Credit Act, it has introduced guidance against which an unfair relationship is tested, a rebuttable presumption of unfairness if the undisclosed commission is above 50% of the PPI policy cost. Worryingly, the FCA’s guidance suggests that only that element of the commission in excess of 50% ought to be redressed to the customer – the FCA is most assuredly very wrong on this.

Plevin v Paragon Personal Finance Limited

[2014] UKSC 61 was decided by the Supreme Court.  It found that where a bank or PPI provider hid very large commissions there existed, as a consequence, an unfair relationship between the lender/provider and the consumer and the Court could make whatever ruling it saw fit to do under ss. 140A-140C Consumer Credit Act 1974. 

50% And Above?

Muldoon Britton has succeeded in Plevin type cases and our Michael Muldoon was instructed in the case of Conlon v Blackhorse and Harrison v Blackhorse. Both of these cases were settled by the Lloyds group in the Supreme Court.

The 50% threshold (referred to as the “tipping point) identified by the FCA is an incorrect understanding of the case law.  This threshold as applied by the Courts numerous times may be the threshold, but crucially, the relief ordered has been the entire commission, not the commission level above 50%. The courts have not followed the FCA line.

This is confirmed by Plevin itself, Brookman v Welcome [2015], Langley v Paragon (2016, a Muldoon Britton case) and Townson v FCE [2016].

Further, it can be held that Claimants are entitled to a refund of all of the PPI payments made. This approach was accepted by the Court in the case of Conlon v Blackhorse. Conlon was appealed and linked to Plevin and was settled before the Supreme Court hearing. In Conlon, the claimant stated that she would not have bought the policy at all had the commission payment been disclosed to her and accordingly the court ordered that she get a full PPI refund, not just the commission or a payment in excess of 50%.

There is also scope for Claimants to sue on credit agreements going back years as the normal six year rule could be challenged on the basis that the commission was concealed by lenders.

Why We Say They Are Wrong

The FCA has no powers with which to over-rule or usurp the power of the Court.  The FCA acknowledged this in respect of the Plevin cases in FCA 17/3 saying:

“By proposing rules and guidance on PPI complaints in light of Plevin we do not in any way seek to usurp the prerogative or discretion of the courts under s.140A-B”

However, the FCA’s use of the 50% tipping point and suggestion that the difference between the commission paid and the 50% tipping point creating an unfair relationship is doing precisely that.  The 50% tipping point was used by the Courts as a rough yard-stick as to what is and is not likely to suggest an unfair relationship under the Consumer Credit Act 1974.  By imposing it as a specific point and only allowing damages as to the amount over 50% the FCA is stepping outside of its legal bounds by declaring what is and is not an unfair relationship, which is the strict purview of the Courts.

Lenders have now applied to the courts or issued defences saying that they should only pay damages equal to the amount over 50% because that is what the FCA is doing.  This is wrong in law.  The courts generally have either ruled that damages are a refund of the entire premium or a refund of the entire commission.  Nowhere has the court used the FCA’s scheme and awarded just the amounts over and above 50% that we have been able to identify.

We are aware that one bank is now writing to all customers who have Plevin type cases and are saying words similar to this:

“When we sold PPI, we did not inform you that we would receive a commission and a share of any related profits from the insurance company. The Financial Conduct Authority (FCA) has determined that the non-disclosure of commission and profit share of more than 50% of a customer’s PPI premium is likely to create an Unfair Relationship. The total undisclosed commission and profit share in your sale was more than 50%.

 I’ve calculated the redress for this decision based on the undisclosed commission and profit share you paid on the premium above 50%. I’ve outlined the commission and profit share level/s I’ve used to calculate my offer in Appendix A.”

That means that customers are incorrectly assuming that this is right, when it plainly is not.  The potential litigation risk this opens up to the banks to is enormous. Our Michael Muldoon says;

“Regrettably, we are witnessing the FCA once again making an error in which consumers are failed and banks are given a helping hand. A fresh wave of litigation is inevitable and it will be significant. We are confident that claims in court rejecting the FCA line would be successful”.

Martin Lewis[1] and Paul Lewis[2], both experts in this area, have previously informed the FCA that they are wrong.

[1] http://images.moneysavingexpert.com/images/documents/MoneySavingExpert-response-to-FCA-PPI-time-bar-consultation.pdf

[2] http://paullewismoney.blogspot.co.uk/2015/10/fca-is-wrong-on-plevin-redress.html

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