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Banks braced for extra £33bn hit over missold PPI

Banks are braced for a further £33bn hit over missold payment protection insurance ahead of an FCA decision on how to interpret a landmark Supreme Court ruling.

The Sunday Times reports banks have been using their latest interim results to warn of the implications of a ruling last year which could prompt further huge payouts over undisclosed commission when PPI was sold.

The Supreme Court issued its ruling in November in the case of Susan Plevin, who took out a loan and PPI in 2006 but was not made aware that over 70 per cent of the commission paid had gone to the lender, Paragon Personal Finance, and a broker.

The court ruled that as the commission had not been disclosed, it was in breach of the Consumer Credit Act.

One banking source told the newspaper the FCA may go for the “nuclear option” of applying the ruling to any product sold where commission was not disclosed. Another said: “Once you open the door for this, it could be apocalyptic.”

A study from Autonomous Research, chaired by former City minister Lord Myners, puts the cost at £33bn if the ruling was applied across financial services.

The FCA will rule on how widely the banks should apply the ruling by the end of the summer. It will also decide on whether to introduce a deadline for consumers to bring PPI misselling claims.

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  • Carly Buxton 15th September 2015 at 10:01 am

    PPI has become a big business on its own, but the FCA are now considering imposing a claim by date on all PPI claims. So if you feel you’re entitled to a refund then visit: http://ppi.co.uk/

  • Charles Evans 10th August 2015 at 3:20 pm

    John, all involved avoided carrying out the correct process of arranging protection. That’s not for debate, the reason was the ability to charge interest and make money on the protection, safe in the knowledge there was no real chance of claw back. Did you simply pluck 80% out of thin air, as you would have to been a very busy person to have read through 80% of the claims? In terms of the claims, if the process of sale contrived even basic underwriting then its a void sale. They new what they were doing applies both ways and the onus of responsibility lay with the those within the industry who started setting money aside before 2004 in lieu of what they knew would be as damaging as the endowment fiasco!

  • John Lacy 10th August 2015 at 1:34 pm

    Charles I fear that you are mistaken—the banks would not have obtained more commision than the amount of the premiums paid so your post doesn’t have any validity at all.
    From what I’ve seen at least 80% of the claims that have been paid shouldn’t have been as the clients were well aware of the term and conditions of the cover they were getting—I’ve even seem people trying to claim when they have already received payments from their now “unsuitable” PPI policy.
    I think more honesty and less band wagon jumping are in order.

  • Charles Evans 10th August 2015 at 12:44 pm

    This and always was the big issue. The banks have been happy to pay back PPI as they made and withheld considerably more from the commissions.

  • John Lacy 10th August 2015 at 11:08 am

    Surely this ruling is insanity!!!

    If the client has been refunded all the premiums and 8% interest there is no further detriment and the lenders will have paid out more than they received in commission so they’ve lost money on top of any fine they may have incurred.

    Isn’t it time a little common sense was applied!!