The unfairness and harm caused by payment protection insurance (PPI) mis-selling has been underlined by a Supreme Court decision – which revealed that, of a £5,780 premium paid by a novice borrower, more than 70 per cent went in sales commissions.
The woman had taken out a £34,000 personal loan and the PPI premium had been added to the amount she had to pay. The company which had recommended the loan kept £1,870 of the premium and the lender £2,280. Although she had been warned in paperwork that a commission was payable by the lender, she had not been told its amount or the identity of its recipients.
The woman launched a claim for her money back under the Consumer Credit Act 1974 and the Court of Appeal ultimately ruled that the introducer’s failure to assess her suitability for PPI was a breach of insurance industry rules. That, in turn, rendered her relationship with the ultimate lender unfair.
In rejecting the lender’s challenge to that decision, the Supreme Court found that the non-disclosure of the scale of the commission and the identity of those who benefited from it also made the relationship unfair. However, the failure to carry out an assessment of the woman’s individual needs did not have that effect. The matter was returned to the county court for a remedies hearing.