Paragon PPI Claims - Open Flood Gates Supreme Court Ruling

Paragon PPI Claims
Paragon PPI Claims

Paragon PPI Claims -

Open Flood Gates Supreme Court Ruling on PPI Claims and Commissions

It has been for a long time an issue where large commissions for the sale of PPI (payment protection insurance) was never disclosed to the customer.  Some commissions are huge sold on the back of the loan.  The question is whether these commission which were often not disclosed or that the commission was know but the amount never revealed to the borrower.

In the Pelvin v Paragon Finance PPI Claim case in the Supreme Court, considered the issue of whether a single PPI commission payment added onto the loan made the relationship between Paragon and the borrower unfair in breach of s140A of the Consumer Credit Act 1974.

The Paragon Loan with PPI

  • Borrower Mrs Plevin
  • Lender Paragon (via LLP Processing (UK) Ltd (LLP)
  • Loan Amount £34,000 repayable over 10 years
  • PPI Policy £5,780 (repayable over 5  years with Norwich Union)
  • PPI Policy - added to the loan (thus attracting interest from day 1)
  • 71.8% of the premium amounted to Commission Payment
  • Commission split was LLP £1,870 & Paragon £2,280

Information about the Commission & PPI

The borrower was only informed that commission was payable on the loan but was not informed of the amount of commission payable or the identity of who would pocket the commission payments.

Power to Re-Open The Loan Agreement

Under Sections 140A to 140D of the Consumer Credit Act 1974, ("the Act") the Court can look at the loan agreement if it considers the terms of the loan are unfair as against the borrower.  The PPI claim solicitors acting for the borrower claimed that the non-disclosure of the commission was unfair and asked the Court to consider if this was the case.  

Under the ICOB Rules (that impose minimum standards on the financial industry) any insurance middlemen are not required to disclose the commission to their customers, but they are required to to ensure the insurance that is sold is suitable. If there is a breach of ICOB RULES - compensation can be paid to the borrower, but a the test of fairness is limited whereas s 140A of the Act provides a broader test of fairness.The Manchester County Court and Court of Appeal decided in favour of Paragon & LLP in that the non disclosure of the PPI commission did not create an unfair relationship because the lower Courts were bound by the Court of Appeal case in Harrison v Black Horse Ltd [2012].

Supreme Court PPI Claim Judgement

In a unanimous decision, the Supreme Court held that non-disclosure of PPI commission and the identity of the middlemen who received the money di made the relationship between the borrower and lender unfair under s 140A (1) (c) of the Act but a simple failure to conduct a needs assessment did not.  

Depending on the amount of commission payable as compared to the loan and PPI amount there will become a "tipping point" where the PPI commission becomes so large that the relationship cannot be regarded as fair if the customer is kept in ignorance.  In this case, the size of the commission payable 71.8% was far beyond that tipping point and thus unfair.

The Case has wide-ranging implications

The decision is not limited to mis-sold PPI claims where commissions were payable.  It is argued that could apply to various loan or insurance products where commission was payble without the full knowlege of the borrower.  You may be able to claim over the past 6 years or even longer depending on legal argument.


If you feel that you may have been treated unfairly by your Bank or Lender in relation to mis-sold PPI, insurance or loans please contact us now for advice and assistance.


Further Reading

Paragon PPI Claims


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