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.

PPI commission

Common scams you need to watch out for

There’s a huge array of methods con artists use to try and trick people out of their hard-earned money. We take a look at some of the more commons ones so you don’t get sucked in.

Phishing

An email from your bank pops up in your inbox. It looks just the same as all the others you receive from. There’s a problem it says. It asks you to click a link and on the page it loads, which also looks like your bank’s website, you’re asked for your sort code, account number, and security code.  You enter the details and you’re told the problem is solved.

The only thing is that the next time you check your account all of your cash is gone, either spent or simply transferred out. The email you received was a scam, where con artists replicate a bank’s email and site styles to trick people into handing over information.

There’s a simple way to protect yourself here. Your bank is never going to ask you to verify sensitive information straight from a link in an email. If you don’t have to go through your usual online banking log in process, it isn’t genuine.

If you’re ever concerned about an email, just call your bank instead. They’ll be able to let you know if the email is real or not.

‘Nigerian 419’ Scams

When these scams first started to appear they usually originated in Nigeria, hence the name. The 419 references the section of the country’s criminal code that prohibits the scam. So what is it?

Essentially you’ll receive some kind of plea for help that involves large sums of money that are set to be taxed heavily in the country the sender resides in. They ask if you’d be willing to have the money transferred to you in exchange for a generous percentage. In other words, the chance at millions of pounds for doing nothing.

Of course there is no money. What the scammer wants is your bank details, which they claim will be used to send you the imaginary money. You can probably guess the next step. The scammer clears out the target’s bank account and disappears into the ether.

With these kinds of cons always ask yourself: is this too good to be true? A Nigerian prince probably has better ways to avoid tax than enlisting the help of Steve in Maidenhead. If you receive any kind of request remotely similar to the above, delete the email and forget about it.

Ransomware

With the NHS being severely hit by this scam recently, it’s important to keep a watchful eye out. Ransomware is when a piece of software gets onto your PC and essentially locks everything down. The software then demands a payment to release your computer and your files. Unfortunately this isn’t an easy thing to get rid off once you’ve got it.

Prevention is the key here. Make sure your PC is always up-to-date as older version often have security issues that hackers take advantage of. Next get some decent security software to protect yourself too. Finally, ensure System Restore is turned on (here’s a step-by-step guide). This means if your computer is taken over you can restore the restore your PC to a time before the ransomware took over and stop yourself losing all your files.

Catfishing

While the name for this con only came about after the 2010 film Catfish, the scam has existed for as long as the internet has connected strangers together. The perpetrator pretends to be someone they’re not, often faking a romantic interest in the victim and stringing them along.

While not all cases involve requests of money, a significant amount do. Usually a fake story is used to illicit sympathy and then cash. Throughout all of this the con artist will use any excuse not to meet the victim in real life or offer up proof of their identity. Unfortunately there are many victims who accept these excuses.

Avoiding these scams is straightforward. If you’re ever getting close to someone online – particularly if they come out with financial sob stories – ensure they prove who they really are. On a separate safety note, if you ever meet someone from the internet always tell people where and when you are going and never go alone.

Doorstep Scams

For as long as there’s been doorsteps there’s been doorstep scammers. There’s a huge range of types, but essentially they boil down to someone knocking at your door and pretending to be someone they’re not.

They may pretend they’re collecting for a charity, or they could be trying to sell you something you don’t need or that won’t ever materialise. Another common one is people pretending to be come kind of official, such as from the council or your electricity company.

Never let anyone in our house if you’re not 100% sure. Anyone official should have ID on them to prove who they are. Give the company or organisation a call to check, but be sure to get the number yourself if you can to be sure it’s correct. Never hand over things like your PIN number to people, or hand over cash either.

If in doubt, ask whoever it is to leave and call someone you trust.

Finally, if you think you’ve been a victim of a scam money.co.uk has a great piece on what to do next here.