Plevin –v- Paragon Personal Finance Limited (“Plevin”)
In this recent Court of Appeal decision Plevin is now authority for the fact that a commission paid on the sale of PPI can, if excessive, render the relationship unfair if the borrower’s informed consent to it was not obtained. The decision has been arrived at even though there is no rule or regulation requiring its disclosure.
The FSA has examined disclosure of such commissions in detail and decided that there should be no requirement for disclosure within its regulatory framework. The effect of this decision is that it creates uncertainty for lenders and whether the relationship is unfair will be determined on a case by case basis and will depend on the level of commission paid. If the commission paid is close to the amount paid in Plevin, which was 71.8% of the PPI Premium, the relationship is likely to be deemed unfair to the debtor.
It was further held in Plevin that a lender is not automatically held responsible for the acts or omissions of brokers under the unfair relationships provisions.
The Supreme Court has given little in the way of guidance as to what may constitute “unfairness” therefore if any lender client is unclear of whether it has acted in an unfair manner, please contact the lender services’ team for further guidance.