Plevin or Section 140 Claims
At Beat the Banks, we are experts in these type of claims. If you think you might have been affected please read on and If you have any more questions, then we are here to help.
You may well have heard about this new type of claim in the press or media. These are now possible under the terms of the Consumer Credit Act 1974. This was upgraded during 2006, to include an important new section called 140 A-C.
Without getting too technical, it deemed that a consumer agreement might be unfair in two potential ways. Firstly, on the basis that something integral within the agreement made it unfair or secondly and more importantly in this particular case, that something that was not in there, but if it had been disclosed at the time, would have influenced the consumers decision to enter into the contract. In this situation, the level of commission earned by the lender, or lender and agent combined.
Way back in November 2014, the Supreme Court, through Lord Sumption issued a decision regarding the case of Mrs Plevin, a retired lecturer and her claim against the lender Paragon and the credit broker LLP Processing Ltd. It transpired that the level of commission shared was 71.80%.
The judge in summing up, stated that although it was not his position to state what a fair commission might be, clearly the level of commission earned was well beyond the “tipping point.”
Section 140 Claims
The FCA have now issued their full guidelines on these cases. Up to 28 August 2017, you have only been able to claim regarding things like, the process of how PPI was sold to you. Maybe it wasn't suitable, you weren't eligible, or you were told that you had to take the cover to qualify for the borrowing.
Now we have a new style of claim. This is based on an unfair commission. The FCA have decided that 50% will be the tipping point. In other words they consider that any commission earned by the lender above that figure, is eligible to be reclaimed.
You may be eligible to get some money back if –
• Your credit agreement was taken before 6 April 2007 and was still open on or after 6 April 2008.
• You took out the cover after 6 April 2007 (whether or not it was still open after 6 April 2008).
• Even if you have been previously declined for a standard claim that falls into these dates and regardless, if in turn you were also rejected by the Ombudsman.
Under the new guidelines, here is what you would get back in the event of a successful claim under a section 140 Claim.
• The difference between 50% and the actual commission applied, the interest charged on that portion, plus 8% simple interest by way of compensation on top of that.
So to be clear, even if the PPI had been previously been cancelled, you are still eligible to make a claim, as long as the actual account is still open within the stated dates. This applies even if the account is dormant.
So what policies are likely to have a big commission that would breach 50%. Let's have look at some examples for you -
• Accident, sickness and unemployment cover on a mortgage was traditionally charged out at around £6.50 per £100 of cover. So let's take a monthly mortgage payment of £300. The cost would be £6.50 x 3 or £19.50.
• In turn if you had a balance on an average credit card, this would be priced out at £0.75 per £100 of balance and this would cover 5% of your credit card balance. So if you had a £6,000 balance then the PPI would cover 5% of the balance or in other words £300. The cost would be £45.
• Take it a step further and you have PPI charged out by Next at £1 per £100 and the likes of GE/Santander Card cards at a whopping £1.50 per £100 of cover. Debenhams, House of Fraser, Evans, Principles, Top Shop, Top Man and Laura Ashley to name just a few.
• Take it even further still and some catalogue accounts such as Freemans and GUS charged cover out at £2.50 per £100 of cover.
• The thing to bear in mind with store cards and catalogue accounts especially, is that the interest rates on these were much higher than credit cards. In some cases easily double. This in turn means that any compensation will be much higher.
Let's look at personal loan protection too. We are talking about cover where the premium would have been added onto the loan from the outset. Banks and other lenders, in a small number of cases did offer monthly payments and this was roughly similar to the cost of ASU on mortgages.
Many years ago, the Office of Fair Trading, did some research. Between 2002 and 2006, a substantial number of personal loans sold by the biggest providers had average commission rates on their lump sum Payment Protection Insurance, of a very hard to swallow 67%.
Now that might seem high, but for secured loans or loans not provided by the main banking sector, these commission rates could be even higher. For example 80% and above. Names to look out for are the likes of GE Money, Welcome Finance, The Associates, HFC and Citi, just to name a few.
Under FCA guidelines, lenders have up to the end of November this year to write to customers, who they previously rejected for a standard PPI claim and who's borrowing fits within the above dates and breaches the 50% limit. There is no automatic refund policy and a claim has to be submitted if you want to recover compensation.
From around August 2015, if a lender has rejected a standard claim for mis-sold PPI, they have undertaken, to now automatically review this for unfair commissions. Just also to reiterate, if you have already been paid out fully for a previous PPI complaint then you can't make a section 140 claim. Going forward, if someone in the first instance is rejected by a lender for a standard claim, but given compensation based on a section 140 claim, then they are within their rights to still take their claim to the Ombudsman. If they are then successful with that appeal, they would receive the difference between the section 140 claim and full amount of the standard claim.
If you would like to know more, you can contact the Beat the Banks team on 01382 200474 or 0800 193 1234. We are open weekdays from 8am until 7pm and from 10am until 2pm on Saturdays.