How much PPI commission is fair?
As is well documented, the Financial Conduct Authority (FCA) has proven its weakness once more by allowing a PPI deadline to be introduced.
Whilst this is being challenged through the courts as it clearly only benefits the banks, there was perhaps a greater scandal hidden in the news.
The news surrounds the hidden commission payments received by the banks for selling PPI to consumers.
The court case
In 2014 the Supreme Court ruled that a customer be awarded compensation due to a lender failing to provide information surrounding PPI commission payments.
The customer was sold a PPI policy for £5,780 by the lender, Paragon Finance, who also loaned the customer £34,000 as part of the deal.
The PPI provider, Norwich Union, took £1,630 of the £5,780 by way of payment for the PPI policy sold to the customer on its behalf by Paragon Finance.
The remaining £4,150 was retained as a commission by Paragon Finance and a secondary introducer.
That is a staggering 71.8% PPI commission!
Quite rightly, the Supreme Court ruled that failing to disclose this commission to the customer resulted in an unfair relationship.
Furthermore it culminated in the customer being denied crucial information in order for her to make an informed decision regarding the value for money of the product she was purchasing.
I think it is fair to assume that any customer would reject such a policy had they been made aware over 70% was pure commission.
The customer was quite rightly awarded £4,500 compensation.
The FCA delay
Firstly it is important to state what the primary and overriding duty of a regulator is.
A regulator is to protect consumers by ensuring those it regulates operates in a fair and responsible manner.
A regulator is NOT there to protect the financial position of those it regulates.
You’d be forgiven for thinking that is not the case when it comes to the FCA, who have consistently been at the whim of the banking sector.
The Supreme Court Ruling was issued on 12th November 2014.
However, the FCA have taken almost 30 months to issue new rules for banks to follow when dealing with complaints involving PPI commission payments.
What does the FCA consider fair?
You may need to sit down if you are not already, when we tell you what the FCA consider to be a fair amount of commission.
Firstly, the court awarded the customer £4,500 compensation which is above and beyond the £4,150 commission payments that were involved.
The FCA have concluded that 50% commission is fair!!!
Yes, the FCA have concluded that 50% commission is fair!!!
Is there any other industry where the regulator deems 50% commission to be fair if it has not been disclosed to a consumer?
This ruling clear conflicts the ruling of the Supreme Court, and is yet another in a long line of examples of the FCA trying to protect the banks.
Had the FCA had their way the customer would have only received £1,260 compensation.
What is a fair amount of commission?
This is clearly a matter for the consumer to decide, not the FCA.
The Supreme Court ruled that because the customer was not advised of the commissions involved she was denied the information required to make an informed decision.
In other words, the PPI policy was mis-sold plain and simple.
Your Money Claim believe that if the customer was denied the information then a 100% refund should be due, and this is what we will be fighting for.
Is this the final word?
Much like the introduction of an unfair PPI deadline, it is clear that this will be challenged through the courts.
The FCA and the banking sector will make every attempt to sweep this under the carpet in order to protect their own interests.
There have been so many opportunities for the FCA and banking sector to put things right but it looks like the fight will have to go on.