Payments Protection Insurance….Again !

How ironic; just when banks thought it was: “safe to go back in to the water”, the “PPI shark” could be coming back to bite them again!

The initial PPI claims were all supposed to have been completed last August 2019, which was the deadline set for such claims to be lodged by consumers with the relevant Card Issuing Banks. As a reminder; this matter was related to the insurance sold, or deemed as “mis-sold” by the banks to card users regarding consumers’ supposed need for “Payment Protection Insurance” (PPI).

Now it appears that apart from mis-selling the insurance product itself being the initial issue, the  commissions the banks earned on each sale, are now also a potential issue of concern. It is coming to light that the large percentage of individual premiums customers paid for PPI were not just to cover the insurance element, but additionally there to meet commission the banks earned from each individual PPI sale. It has been suggested that as much as 90% or more of the premium went in commission to the banks on each PPI sale.

The FCA in 2017 stated that banks should refund the excess amounts when commission payments exceeded  50% of the premium paid. Some consumers have since gone to court and argued that these PPI policies were completely “rigged” in favour of the supplier, and therefore unfair to the customer. Consequently, they have been able to win some of this commission back according to the size of the premium paid at the time, the period over which the PPI was in force, and the customer “on risk”.

The result of this could be a further deluge of new claims by consumers on all commissions paid to the Card Issuing Banks under these former  PPI schemes. This would apply even if consumers whom took PPI were supposedly “satisfied” with the offering as this suited them when purchased; but were unaware of the “unfair nature” of the product at the time of the sale to them, and the high commission in fees taken by the banks on the sale itself.

The difference this time is: where before one, could use a “Collection Agency” at an absurdly high cost – in the region of at least 20% – as a fee to the Agency for their services in recouping a refund, which was deducted from the amount re-paid to the consumer; or one could deal directly with the banks themselves, in order to obtain the refund owed. Consumers now will have to file their claim through the courts.

However; watch this space! There is sure to be more on this in the very near future.

Eliot Charles Heilpern
The Payments Business

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