UK Bank customers in line for a £33bn windfall possibly. Bigger than PPI payouts.

Paul_1977

The Daily Mail reports:

UK bank customers could be in line for a staggering £33billion in compensation thanks to a landmark court ruling regarding payment protection insurance (PPI).

Britain's top four lenders - RBS, Lloyds, HSBC and Barclays - are bracing themselves for a huge hit following a Supreme Court decision last November.

The result of the case paves the way for another financial scandal, with major banks having already recently paid out tens of billions for mis-selling PPI and fixing the Libor interest rate.

The landmark ruling was made in favour of 59-year-old widowed college lecturer Susan Plevin, who took out a loan and PPI policy in 2006.

She complained to the court that at the time, she wasn't made aware that more than 70 per cent of the commission she paid ended up in the pocket of her lender - Paragon personal Finance - and a broker.

The court ruled that if a PPI seller failed to disclose to a customer that it had received a large commission from the product provider, the sale was unfair under the 1974 Consumer Credit Act.

Now banks are waiting to find out how widely the ruling will be interpreted, with City watchdog The Financial Conduct Authority (FCA) reviewing how the case should be applied.

The result could mean that if a PPI policy was otherwise sound the seller could still be made to repay the customer if it had received a large, undisclosed commission.

One senior official at a British bank told The Sunday Times that the ruling could be 'apocalyptic' if applied to any financial product where commission levels were not disclosed to the customer.

They said some fear the FCA will choose the 'nuclear option'.

Read more: http://www.dailymail.co.uk/news/article-3191237/UK-bank-customers-line-33BILLION-windfall-landmark-court-ruling-exposed-new-finance-product-mis-selling-scandal.html#ixzz3iKaYZdd4
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dunstonh

Daily Mail slow off the mark. The FCA statement was 2 months ago.

Plevin was all about an intermediary being used and the lack of disclosure and creating an unfair relationship. Both LLP and Paragon acted as insurance intermediaries. Banks retail their own product and do not use intermediaries. Plus, the ruling clearly focuses on the size of the commission which is awful in that case but not typical (typical is more around a third of that and in line with household insurance). So, it will be interesting to see how that gets interpreted in future.

I suspect that the banks will avoid this one and the FCA will adjust its rules. However, it will be the brokers and broker lenders that suffer some degree of claims. Many of whom have since folded and some have even set up as claims companies getting people to complain about transactions that their earlier companies were involved in but no longer exist so the FSCS faces the bill and it will be some unscrupulous CMC that benefits.

You can never really tell and that is just may unqualified opinion.

dunstonh

The FCA will shortly be publishing how firms should view plevin complaints. It is currently suggesting that where the commission is above 50%, then that would be considered unfair. However, as Plevin relates to PPI, the FCA is also considering applying the same timebar date as PPI complaints in general.

Plus, where it was not mis-sold but the commission was greater than 50%, then the difference between the commission paid and 50% should be rebated.

The average commission on single premium PPI is 67%. They haven't quoted regular premium PPI but I know commission rates on that varied around 20% to 35% typically.

So, it does look like the impact of plevin will be limited.

addedvaluebob

dunstonh wrote: »

However, it will be the brokers and broker lenders that suffer some degree of claims. Many of whom have since folded and some have even set up as claims companies getting people to complain about transactions that their earlier companies were involved in but no longer exist so the FSCS faces the bill and it will be some unscrupulous CMC that benefits.

So are there as many unscrupulous financial advisers as there are CMCs?

dunstonh

addedvaluebob wrote: »

So are there as many unscrupulous financial advisers as there are CMCs?

Dont be silly.

Alpine_Star

dunstonh wrote: »

The average commission on single premium PPI is 67%. They haven't quoted regular premium PPI but I know commission rates on that varied around 20% to 35% typically.

Not according to the Competition Commission PPI Market Study:


''Typical commission rates are 50 to 80 per cent on PLPPI and CCPPI and 40 to 65 per cent on MPPI. Further, distributors typically take 90 per cent of any profit share and we have seen instances where the distributor receives 100 per cent of any profit share after payout of claims.''


http://webarchive.nationalarchives.gov.uk/20140402141250/http:/www.competition-commission.org.uk/assets/competitioncommission/docs/pdf/non-inquiry/rep_pub/reports/2009/fulltext/542.pdf

dunstonh

Not according to the Competition Commission PPI Market Study:

I would suggest they are looking at single premium MPPI. You certainly do not see figures that high on the intermediary market for regular premium. Or perhaps are including secured loan brokers in there.

Alpine_Star

dunstonh wrote: »

I would suggest they are looking at single premium MPPI. You certainly do not see figures that high on the intermediary market for regular premium. Or perhaps are including secured loan brokers in there.

No, the figures were based across ''all PPI products''.

Besides the CCPPI wouldn't be single premium in any event.

djej55

What about Linor rate fiixing- thta affected my LloydsTSB mortgage in Spain ....do I get compensation

dunstonh

djej55 wrote: »

What about Linor rate fiixing- thta affected my LloydsTSB mortgage in Spain ....do I get compensation

Nothing so far has suggested that consumers will get any compensation as the rate was both manipulated up at times and manipulated down. The margins of difference for consumers is very small. It was the cumulative effect.

magpiecottage

djej55 wrote: »

What about Linor rate fiixing- thta affected my LloydsTSB mortgage in Spain ....do I get compensation

What is Linor rate fixing? It sounds like a means of gluing down floor covering.