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Is there another scandal lurking within PPI?

Payment protection insurance (PPI) is a phrase synonymous with the biggest scandal to have hit the British banking industry. Tales of large profits and duff policies have gripped the nation for the last couple of years but now it seems, there is another scandal possibly lurking beneath this one.


We are all now aware of the profit that banks made on the sale of PPI – experts calculate that at one time, banks were reaping an 80% profit on each policy sold. But there was another aspect that made the sale of PPI policies so very lucrative: commission.

And it could mean that the Big Four banks – HSBC, Barclays, RBS and Lloyds Banking Group – could face a fresh round of compensation claims.

The issue with commission

When you are compensated for mis-sold PPI, you are to be put back into the financial position you would have been in, had you not been sold the policy. In effect, banks are down having to delve deep into their profits to make sure you are compensated the full amount.

But as well as profit, people who sold PPI policies were also given a commission for each policy they sold. There were large sales targets for individuals and for teams in some cases too, allegedly. In other words, hit the target and surpass it, and you could end up with a very handsome commission or bonus indeed.

The problem is…?

It has been ruled that commission payments which are not disclosed to the customer are, under the Consumer Credit Act, illegal.

In other words, if the sales person did not reveal to you or the bank did not make it clear that they would receive a commission from the sale of the policy they were making to you, then you may be entitled to compensation. Some consumer organisations also say that if the consumer had known how much commission was being paid, they may have questioned the cost of the policy a little further.

What does it mean?

As yet, there has been no further public action or comment on this ruling. Thus, if you have already made your claim for compensation, you may need to wait to see what happens. Likewise, current compensation claims will continue following the claims procedure.

It could, however, present the four big banks with an addition bill, totalling in the region of £33billion according to one financial expert.

If you have yet to make a claim for mis-sold PPI, then why not call Payment Protection Scotland.

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