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PPI Compensation and Commission – Another Case to Answer?

Toward the tail end of 2015, there was an important case linked to PPI in which a customer who has been sold the payment protection insurance (PPI) policy won her case against her lender.

On this occasion, it was not the policy itself but a hitherto a little talked about factor in the sale of PPI – commission.

What we know about commission?

This is a payment that is made when a company or individual sells another company’s policy to a customer. It can be classed as a thank you or an incentive payment.

In some cases, this can be a lot of money but in others, it could be seen as a token gesture.

It can be paid as a one-off lump sum or a monthly amount.

It is not uncommon practice, although most financial advisers and so on will provide their customer with what is known as an illustration. This sets out who will be paid what in commission for selling you that particular policy.

With PPI however, this did not quite happen.

A high level of commission

The main issue in the court case at the end of 2015 was the customer’s argument that had she known how much commission the lender was receiving from selling her PPI, she would not have bought it.

Clearly, someone has to pay for this commission. This commission is effectively passed on into the PPI premium. In other words, the more commission someone received, the higher the PPI premium passed on to the customer.

A high level of profit too

This high level of commission coupled with the high level of profit that banks and lenders were also making on sales of PPI meant that the premiums were sky high. The low level of cover exacerbated the situation, making many customers frustrated at the high price they were paying for a policy that offered little in the way of cover.

What now?

The Financial Conduct Authority (FCA) are looking into the implications of this court ruling relating to high level of commission being paid to lenders, and what effect this has on future PPI compensation claims and those that have already been made.

It may mean more money for customers or it may mean tighter rules on how much commission can be paid, as well as the information given to customers.

In the meantime, if you have a claim for PPI compensation, contact Payment Protection Scotland today.

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