Relief on PPI mis-selling settled

The appropriate relief for the mis-selling of payment protection insurance (PPI) is the repayment of the commission element alone and not the entire premium plus interest, a court has found.

In November 2014, the Supreme Court ruled in Plevin v Paragon that the non-disclosure of commission by a PPI provider was unfair, which marked the first time the 'unfair relationship' provisions contained within the Consumer Credit Act 1974 had been considered at such a high judicial level.

However, a subsequent hearing in the Manchester County Court determined that the appropriate relief was not the entire PPI premium plus interest but the commission element only.

The case concerned a Mrs Plevin who brought a PPI mis-selling claim against Paragon Personal Finance Limited. The court was asked to determine whether the relationship between Plevin and Paragon was unfair under section 140A of the Consumer Credit Act.

Though Plevin made multiple claims against Paragon, the court's decision hinged on whether the non-disclosure of a 71.8 per cent commission was unfair.

In a previous case, Harrison v Black Horse Limited, it was established that the key requirement in determining unfairness was in whether the lender had complied with its regulatory obligations.

Overturning the Harrison decision, the Supreme Court found that even where there had been compliance with the regulatory framework, determining whether a relationship was unfair demanded a wider range of considerations. The court ruled that the non-disclosure of the commission was unfair and remitted the case to the county court for determination of the appropriate relief for Mrs Plevin.

At the relief hearing in the Manchester County Court, Plevin argued she should be entitled to a return of the entire PPI premium plus interest. Paragon submitted that the relief should be limited to the 71.8 per cent commission.

In making its decision, the court found that the PPI was not compulsory and Plevin had positively requested its inclusion. The court also decided that Plevin merely stated she would have questioned the PPI product had she known of the commission. She did not state that she would not have taken it out.

Finally, the court said Plevin had made clear she wanted PPI and had had the benefit of it for the full term. As such, the judge agreed with Paragon that the appropriate relief would be repayment of the commission element of the PPI only.

Commenting on the judgment, Adam Finch, a litigation partner at Harrison Clark Rickerbys, said: 'The Plevin decision is a mixed blessing for both borrowers and lenders. On the one hand, it removes the certainty previously offered by Harrison v Black Horse Limited, where it would be difficult to find unfairness provided the regulatory framework had been complied with. By contrast, the parties will now need to take into account a wide range of factors in determining whether there was an unfair relationship, which is likely to result in greater numbers of contested claims.

'On the other hand, the decision on the level of relief does introduce a welcome distinction between the quantum of the relief available in those cases in which there has been misrepresentation as to the need for a PPI product, and those in which the consumer requests the product but is not fully informed about the associated costs.'

John van der Luit-Drummond is legal reporter for Solicitors Journal

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