FCA Consultation Proposals: PPI complaints and Plevin

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Walker Morris reported previously on the Supreme Court’s decision, in Plevin v Paragon Personal Finance [1], that non-disclosure of a significant amount of Payment Protection Insurance (PPI) commission earned by a lender created unfairness in the lender/borrower relationship. We explained that uncertainty as to the amount of commission requiring notification in order to avoid unfairness represented a problem for lenders. The Financial Conduct Authority (FCA) has now issued a statement [2] summarising its proposed approach to PPI complaints handling generally and following on from Plevin. The key aspects of the FCA’s statement are as follows.

PPI complaints

  • The FCA will consult, by the end of the year, on the imposition of a two-year deadline, accompanied by an FCA-led communications campaign, by which consumers would need to make their PPI complaints, or lose their right to have them assessed by firms or the Financial Ombudsman.
  • The FCA considers that this proposed approach would: prompt customers into complaining and getting redress sooner; bring the PPI issue to an orderly conclusion; and help rebuild public trust in the retail financial sector. It may also encourage more customers to complain to firms directly, rather than using and paying claims management companies.

Solving the Plevin problem

  • The FCA will also consult on introducing rules and guidance to reduce uncertainty following the Plevin judgment and to enable firms to take a fair and consistent approach. The proposed rules and guidance would say that a firm should presume, when assessing a relevant complaint [3], that failure to disclose a commission of 50% or more gave rise to an unfair relationship. The proposed rules and guidance would provide for this assumption to be set aside in certain circumstances, but they would also envisage limited circumstances in which a failure to disclose a commission of less than 50% could be unfair.
  • The proposed rules and guidance would require a firm to pay redress where an unfair relationship had arisen, such redress being:
    • The difference between the commission the customer paid and 50% of the premium paid (for example, the difference between, say, 72% of the premium paid, as in Plevin, and 50%, so 22% of premium in this case); plus
    • Historic interest paid on that portion (in this example, interest paid on the 22%); plus
    • Annual simple interest at 8% on the sum of the above.
  • The proposed rules and guidance would also require firms to consider whether, in the circumstances of the particular case, they may need to pay more redress than under this approach.

Walker Morris will keep the FCA’s consultation and communications under review and will report on any developments in due course. In the meantime, if you have any queries in connection with PPI mis-selling or any other regulatory issues, please contact a member of the Banking Litigation team.


[3] That is, a non-disclosure/unfairness complaint in respect of a PPI policy covering a credit agreement under section 140 A of the Consumer Credit Act 1974.