After a key legal case that may set a precedent for future claims, U.K. banks may have to pay up to £18 billion to customers who were sold payment protection insurance (PPI). The case centered around a couple who unknowingly paid 76 percent commission for their PPI, the Financial Timesreported.
The couple had signed an agreement for a £30,000 ($39,500) loan in 2004, with a total sum of £40,500 that included a PPI premium of £10,500. However, Paragon Bank‘s Personal Finance reportedly received a £7,985.46 commission on the PPI premium, making up 76 percent of the amount. A judge in the U.K. ruled that the couple would not have bought the policy if they knew about the commission.
While Barrister Elis Gomer said the case could send “shockwaves,” Paragon Bank believes “this decision is at odds with other cases heard recently and does not create a precedent.” And, though the the Financial Conduct Authority (FCA) has said the bank should return commissions in excess of 50 percent of the cost of a premium, lawyers are now contending that customers should have all of the money they paid for commissions.
The news comes after U.K. consumers lodged 3.04 million complaints in the second half of 2016 concerning financial products. This was according to figures published yesterday by the FCA, the U.K.’s financial watchdog. In its figures, the FCA noted that total complaints were higher in the second half of 2016 compared to the first (when 2.05 million were recorded), in part, because the organization changed its recording process. Prior to the last half of 2016, organizations didn’t need to report complaints if they were resolved by the end of the following business day.
By far, the product that received the most complaints was PPI, with some 895,000 complaints, or 29 percent of the total. To put that another way, PPI averaged just over 4,900 complaints on a daily basis for six months straight. Still, PPI complaints were down from more than 927,000 in the first half of the year.