THE IMPACT OF PARAGON v PLEVIN
THE IMPACT OF PARAGON v PLEVIN
The significance of Paragon v Plevin relates to the concept of “unfair relationship”. To be technical this refers to Section 140 of the Consumer Credit Act 1974. The Court decision in 2014 was the first time that this Section of the Consumer Credit Act had been challenged to such a high judicial level.
The circumstances briefly were that at the time of sale Mrs Plevin was a widowed College Lecturer age 59 living in her own house with a mortgage and various unsecured personal debt. She responded to an unsolicited leaflet put through her letterbox by an independent Credit Broker called LLP Processing UK Ltd. By the time of the Court case that Company had gone into Liquidation.
In short, this lady took out a mortgage which went through Paragon Personal Finance Limited. It was a loan paid over 10 years. Included in the same was Payment Protection Insurance with a lump sum premium of £5,780. Accordingly her loan of £34,000 was increased to £39,780.
Of the premium of £5,780 it is incredible to state that 71.8% was taken as commission. This was transmitted to Paragon who effectively retained £2,280 and sent LLP £1,870.
The main point is neither the amount of this commission nor the identity of the recipients was disclosed.
Readers will be astonished to note the commission that was involved and effectively the profit margins involved. Paragon are described as a sub-prime Lender, meaning that anybody who uses them usually has had some problem with finance. Accordingly, interest rates are more expensive. We are not saying that Mrs Plevin had such problems but she was sold that product. If she had not had financial problems and was sold this product the sale was even worse.
You will see, with such an add-on, to which a significant interest would have been paid per month this lady paid significantly more that she needed to pay and indeed, significantly more than was disclosed. You will of course note that she was a Headmistress and as such it is reasonable to presume that she had reasonable, if not significant sickness and illness benefit.
LLP were the agents acting on behalf of Paragon. There were effectively two elements of unfairness :-
- The non-disclosure of the amount of the commissions;
- ……………………. of any of those involved to assess and advise upon the suitability of PPI for her needs. In particular in this case the PPI only covered half the term of the Insurance, she had no dependents, she already had Life Insurance and her terms of employment included general Sickness and Redundancy Benefit.
It is easy to see why this was regarded as an unfair relationship.
If a client intimates against a Lender who sold PPI they are accordingly entitled to receive not only all the payments that they made on the improperly sold PPI. It is clear that they should not suffer due to the fact that commissions were paid.
In many a case the Banks/Financial Institution have looked at all commissions that were paid and ensured that these were reimbursed. On a number of cases it is quite clear that commissions paid were not taken into consideration.
Again, this is something that any consumer considering the merits or otherwise of PPI should look into. It is a more difficult and complex issue than the basic mis-sale of PPI. It is one of the main reasons why a reputable Claims Management Company or Solicitor might well be instructed. That is the choice of the consumer.