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What is the Claim?

PPI stands for Payment Protection Insurance. PPI is a kind of insurance contract that can be taken out with a loan, credit card, mortgage or other financing (such as catalogue or store accounts, or car financing). It was supposed to provide protection to individuals to ensure that credit repayments could be met if they were not able to work, due to illness or redundancy.

The Claim

Millions of UK individuals are owed thousands of pounds in compensation for secret commission unlawfully charged by banks or credit card companies on Payment Protection Insurance (PPI).

If you had a loan or credit card with PPI, it is likely you were secretly charged an extremely high level of commission that can now be reclaimed.

The first wave of PPI claims centred on the insurance product being mis-sold, but this new legal action is about the fact the banks took advantage of their customers, charging up to 95 per cent commission. And whereas earlier claims were made individually, this new action will involve customers acting together to reclaim the money that they are owed.

Both the FCA (the financial services regulator) and the courts have found that the financial institutions’ conduct has been unlawful.

A compensation scheme which enabled some customers to recoup some undisclosed commission money was previously set up but Harcus Parker estimates that six million customers have never been refunded or received  less than half of what we believe they are owed.

This new fully-funded collective action will help stop banks and credit card companies from using their financial might to block these valid claims.

It will also make it financially viable for those with smaller claims to be able to recoup the money that they are owed.

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How was PPI mis-sold?

The terms of the PPI policy were not made clear; but had they been, the policy would not have been wanted:

• the policy was frequently not suitable, either because the customer would never be eligible to claim – if, for example they had retired or were self-employed or unemployed already had equivalent cover through other means such as their employment; and

• if a customer had experienced medical problems in the past, they would be classified as having a pre-existing condition which would prevent any payment under the terms of the policy.

• Bank employees were heavily incentivised to sell PPI

• Taking out PPI was often made a condition of getting a loan

• PPI was ‘sold’ to credit card customers who did not know they had agreed to take out the policy

• Most importantly, the premiums were extremely expensive. Typically, more than 75% of the amount paid consisted of a commission paid to the bank by the insurer, which was often a related party.

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The Compensation Scheme

PPI is generally recognised as the most notoriously abusive financial product of recent years. The full history is complex; a fuller account is given here.

In April 2013, 20 years after the first PPI claim had been brought in the Courts, the Financial Conduct Authority (FCA) took over the regulation of PPI products and introduced rules to allow people to complain about PPI if they felt that they had been treated unfairly.

Eventually, the deadline for making a complaint under the FCA’s scheme was set for 29 August 2019.

By August 2019, £48 billion had been paid out customers.

The FCA had hoped that the 29 August 2019 deadline would bring the scandal to a close and offer protection to consumers whilst helping to restoring the integrity and reputation of the insurance market. But an estimated £18 billion still remains to be claimed.


Secret Commissions: PPI 2

Initially, PPI claims were brought on the basis that the product had been mis-sold. But this was not the main problem. The banks and credit card companies were charging eye-wateringly large undisclosed commissions on the sale of PPI policies. In some cases, the level of commission was 95 per cent of the premium, which meant that for every £1 paid for the insurance by the customer, 95p was secretly paid to the bank or other financial institution.

The Supreme Court ruled in 2017 in Plevin v Paragon Personal Finance that a high level of undisclosed commission within a PPI premium made the lending relationship unfair so as to entitle Mrs Plevin to compensation under the Consumer Credit Act 1974.

PPI secret commission claims have therefore become known as ‘Plevin’ claims.

The FCA’s response, with which we disagree, was to suggest that there was a ‘tipping point’ between fairness and unfairness: a secret commission above 50% was unfair in the FCA’s opinion; and the FCA went on to suggest that any commission paid above 50% of the premium should be returned to the customer.

The FCA’s views are, with respect, open to criticism, in that a commission of 49% would still be unreasonably high, and there is no good reason why the entirety of a PPI premium should not be returned to the customer, as no customer would have agreed to pay PPI if they had been aware of the high level of secret commission.

A variety of court decisions have agreed with our position that the whole of the secret PPI commission should be returned to the customer.

The possibility of making a Plevin claim after 2017 meant that customers whose claims were rejected or who complained through the compensation scheme and received a partial ‘tipping point’ payment may now claim, citing the unfairness of the secret commission. And of course, anyone who has not yet made a PPI complaint can also now claim.

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The current position

We estimated that six million customers remain uncompensated, and that they are collectively owed around £18bn of compensation.

The only way to make a claim now is by bringing legal proceedings through the courts.  However, attempts to bring legal proceedings following the closure of the FCA’s scheme in August 2019 have understandably been met with fierce resistance by financial institutions who have:

• been slow to release vital information to law firms to evidence the amount of commission paid by customers;

• in some cases failed to write to their customers to tell them that they may be able to make a claim; and

• out-spent customers and made cases financially unviable to pursue individually through the courts.

Rather than finally coming clean and once and for all addressing the PPI scandal by repaying all of the wrongly-taken premiums, financial institutions continue to take advantage of their customers by retaining profits and depriving customers of the compensation they are owed.

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Rather than finally coming clean and once and for all addressing the PPI scandal by repaying all of the wrongly-taken premiums, financial institutions continue to take advantage of their customers.

The Solution: Collective action

Rather than representing clients in individual claims against the financial institutions, Harcus Parker is creating a group of claimants who share the same essential complaint.

We are seeking a Group Litigation Order (GLO) from the court, through which we will ask the Court to decide the key issues which apply to all members of the group so that an adequate remedy is provided across the board.

Bringing proceedings as a group will address the difficulties that have arisen to date, in bringing the financial institutions to account:

• the claims will all be managed together, removing the risk of inconsistent findings being made in cases heard in different County Courts;

• the defendants will find it more difficult to obstruct proceedings brought by hundreds of thousands of claimants represented by an industry recognised, specialist, group litigation law firm;

• the credentials of Harcus Parker have enabled funding to be obtained to pursue the claim.  The defendants will therefore know that a strategy of out-spending the claimants will not work;

• as a first step, we will ask the court to make an order requiring the defendants to disclose necessary information in a specified form, instead of potential claimants having to make a Data Subject Access Request;

• by joining the group, claimants will achieve economies of time, resources and cost and have the capability of sharing information and risk across the group.  There is strength in numbers;

• a cohesive, well-prepared case presented on behalf of all eligible claimants will enable the Court,  once and for all, to deal with all issues arising from PPI and in an time and cost efficient manner.  The alternative is tens of thousands of individual cases being pursued, which would place an intolerable burden on the court system, with inevitable delays.

Harcus Parker has estimated that the average refund for customers will be approximately £3,000. The total claim is estimated to be £18 billion.

We offer clients the chance to join the litigation on a ‘no-win, no-fee’  basis – effectively de-risking claimant participation.