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.Read More
We hear little of the Chief Executive of the Lloyds Group these days on PPI matters. He appears to be doing a very good job in all other areas. When he originally took his post he was exceedingly critical of Claims Management Companies. Indeed, he suggested elements of dishonesty. It has always baffled me how anyone intimating themselves, or using a Claims Management Company or Solicitor Company to intimate a PPI claim could be described as being potentially fraudulent. If a Policy did not have the product it would be refused. If the product had PPI and the Bank were of the opinion it was fairly sold how could anyone suggest the intimation was fraudulent.
There are no doubt people that sold PPI have lodged claims when they frankly hadn’t a clue what was going on. There are no doubts at all that people who have no idea whether they had PPI have intimated claims. In many respects this goes to the route of this grossly mis-sold product. Lack of discussion with or information provided to the consumer.
With regards to the fine on the Lloyds Banking Group, this related to Lloyds Bank plc., Bank of Scotland plc., and Black Horse Limited. This related only to the method by which they treated customers, unfairly when handling Payment Protection Insurance complaints. Between March 2012 and March 2013.
It was estimated that during that period 2.3 Million PPI Policies were investigated and some 37% of the complaints were rejected at first instance. The requirement from the Financial Conduct Authority is that Firms assess these complaints impartially are naturally allowed to reject unfounded claims (In other words the culprit Organisation is to act as an impartial Judge & Jury).
However, in March 2012 the guidance to Lloyds instructing complaints handlers at Lloyds was that the overriding principal when assessing complaints was that Lloyds PPI sales process was compliant and robust unless told otherwise. They described this as “the Overriding principal”. Much of this was brought to light by an article in the Sunday Times some years ago. In short, a Sunday Times Reporter obtained a job at the Lloyds Complaint Unit and ascertained how they dealt unfairly with these complaints.
It was accepted by the Financial Conduct Authority that some Complaint Handlers relied on this overriding principal to dismiss customers’ personal complaints and accounts of what had happened during the PPI sale or indeed did not fully investigate them. In many cases Lloyds who were meant to contact customers to check over their version of events did not do so.
At the time, it was commented by the Financial Conduct Authority that “The size of the fine today reflects the fact today that so many complaints were mishandled by Lloyds. Customers who have already been treated unfairly once by being sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds conduct was unacceptable”. Examples of how customers lost out as a result of the Lloyds failings included:-
- Complaint Handlers justified the decision to reject customers’ complaints on the basis that the sales process used by Lloyds was robust, as directed by the Overriding principals. This was when Lloyds knew there was significant process failures and indeed mis-selling.
- Some consumers had their complaints rejected on the basis they had been “fully investigated” with “appropriate weight and balance consideration given to all available evidence”. This was not the case.
- A customer’s account of what had actually happened was not always considered in a balanced way. The evidence of the Bank paperwork was preferred.
- Due to poor contact of the consumer, or indeed no contact some customers who clearly would have provided further evidence were not given that opportunity.
Since that date the Financial Conduct Authority has appointed an Independent body to oversee the remediation process. However, this was over 2 years ago. We are still receiving information that the remedial process is still underway. The obvious concern for any consumer is that whereas they are advised to simply “sit back and await for the Bank to re-look at cases” there is now a time bar. For how long do clients sit and wait?
As a subscript to this post, as recently as 22nd July 2017 the Guardian newspaper reported Lloyds Banking Group will take another hit from payment protection insurance mis-selling this week, taking its bill for the scandal close to £18bn.Read More
Fines imposed on members of the financial industry such as Banks or Brokers – Some consumers are surprised when you mention fines! Why Should they be surprised?
This article is not one for light evening reading it is to advise of some of the fines imposed, the seriousness of the same and the amount of this considerable problem of which the Guardian Newspaper believe that one out of 5 claims only have been made.
In previous blogs I have mentioned the fine to Clydesdale Bank of 20.6 Million. Clydesdale Bank and their sister Bank – Yorkshire Bank were fined for, including providing false information about complaints to the Financial Ombudsman Service, meaning that many of the 126,600 PPI complaints that Clydesdale Bank made a decision on between May 2011 and July 2013 up to 42,200 may have been rejected unfairly.
The Financial Conduct Authority also says that some 50,900 upheld complaints may have resulted in the consumers receiving inadequate redress.
Of considerable concern to the Financial Conduct Authority was that Clydesdale’s failings mainly occurred after April 2011 which was the date when the High Court effectively rules that it was unfair to place cases on hold and providers had to follow a list of rules to proactively find and compensate consumers who were mis-sold.
Lloyds Bank were fined £117 Million in a decision published in June 2015 in respect of their failures between March 2012 and 2013. During that period more than 2.3 Million PPI Policies were considered and 37% of claims were rejected.
Lloyds were hit with fines due to the fact that they had issued guidance to the complaint handlers that the overriding principal when assessing complaints was that Lloyds PPI sales were compliant and robust. This was defined as the overriding principal.
Lloyds did not advise their own complaint handlers of know failings identified by them in their sale process. Many complaint handlers happily followed in this Overriding Principal to unfairly reject the complaints of the consumers.
Here are some of the others:-
- EGG – fined £721,000 in December 2008 for serious failings in its credit card PPI sales by telephone between January 2005 and December 2007. The FSA found failings in approximately 40% of telephone sales of credit card PPI made by EGG in a 2 year period. When customers said on the phone they did not wish PPI the Firm directed its sale staff to use techniques to persuade the customers to take the Insurance called “objected handling”. These techniques included over-emphasising the positive feature of the PPI or telling the customer they could take the PPI for a free period and cancel it later if they didn’t want it. In some cases, even when the customer did not consent, PPI was applied to their credit card anyway.
- Alliance & Leicester (Santander) were given fines of £7 Million in October 2008 for serious failings in its PPI telephone sales between January 2005 and December 2008. Alliance & Leicester (Santander) did not make it sufficiently clear that PPI was optional and it trained its staff to put pressure on customers where they queried the inclusion of PPI in their quotation or challenged Advisors recommendations.
- 5 Motor Retailers: GK Capitals Group Limited; George White Motors Limited; Ringways Garages (Leeds) Limited; Ringways Garages (Doncaster) Limited and Parks of Hamilton (Holdings) Limited – Fined £175,000 in August 2008 for exposing 2,175 customers to the risk of being sold unsuitable PPI Policies.
- Liverpool Victoria fined £840,000 for serious failings in the sale of single premium PPI by telephone.
- Land of Leather fined £210,000 for not having effective monitoring or training of PPI sales. In addition, their Chief Executive was fined £14,000 for failing to properly oversee the sale of PPI by the Firm.
- HFC Bank (also trading as Household Bank) and Beneficial Finance fined £1.085 Million for putting customers at an unacceptable risk of being sold an unacceptable Policy.
- Black & White Group Limited (now in Liquidation). This would have led to a fine of £2.2 Million.
- Regency Mortgage – fines of around £56,000
- Loans.co.uk – fined £455,000
- Redcats (Brands) Limited – fined £270,000
- GE Capital Bank – fined £610,000
- Hadenglen Financial plc – fined £133,000 and their Chief Executive was fined £49,000
- Swinton Group – fined £770,000
- CT Capital Limited (CT Capital) – fined in 2000 – £360,900 (in the case of CT Capital between May 2011 and November 2013 dealt with some 6,669 PPI complaints). CT Capital failed to put in place complaint handling processes to deal with PPI complaints appropriately which resulted in consumers missing out on redress payments to which they were entitled. The effect on individual consumers was potentially significant. The average redress payment made in respect of a fully upheld complaint during that period was £5,959. It appears that despite being aware that specific provisions governed the handling of PPI complaints had come into force in December 2010 CT Capital failed to put in place processes designed to follow these provisions until November 2011. Even after that time CT operated flawed Policies.
Clydesdale Bank – fined £20,678,300 for serious failings in its PPI handling. In the Clydesdale’s case the Judicial Review decision in April 2011 they implemented in mid-2011 inappropriate policies to deal with complaints. In effect its complaint handlers were not taking into account all relevant documents when deciding how to deal with complaints. In addition, between May 2012 and June 2013 Clydesdale provided false information to the Financial Conduct Service in response to requests for evidence of the records Clydesdale held on PPI Policies sold to individual consumers. A team within Clydesdale’s PPI complaint handling operation altered certain system print outs (in a small number of cases) to make it look as if Clydesdale held no relevant documentation and deleted all PPI information from a separate print out listing the products sold to the consumers. These practises were not know to or authorised by Clydesdale PPI Leadership Team or more senior management.Read More
The PPI Questionnaire – For over 10 years I have been concerned about the emphasis put on clients to complete an application for PPI mis-selling themselves.
Various Welfare Rights Organisations, Financial Advice Organisations, Newspapers and certainly the Banks themselves encourage the consumer to deal with the cases themselves.
We have seen on occasion what has happened when Organisations accused of mis-selling are allowed to be the Judge & Jury of their cases. It is sometimes not a nice place for the consumer i.e. fines imposed when the Lloyds Group delayed payment; fines imposed on Lloyds and Clydesdale for not providing data; the re-investigation of numerous cases where the correct data was not revealed or the financial calculation was not correct.
I have said that a considerable amount of our population, whether in Scotland or the whole of the UK, can if they wish complete the PPI Questionnaire application themselves. We have clients that are businessmen or women, who are simply busy and do not wish to deal with the paperwork. We have clients, who simply do not trust Banks. More importantly we have clients who are not citizens who have benefited from the best of education and have a considerable difficulty not only lodging the intimation, not understanding any refusals but more particular in completing the PPI Questionnaire.
The PPI Questionnaire may vary slightly but in general the PPI Questionnaire is the approved version which you would receive and download from the Ombudsman Service. There are areas in this agreement which baffle me. They baffle me as I cannot understand why they are in the Questionnaire. The only reason I can have is that they put off the consumer. Surely I am mistaken!!!
I refer in particular to Section “C”, a Section which appears to have been approved by the previous FSA, now Financial Regulation Authority and certainly at least by the Ombudsman who produces the same. It is in my opinion a completely off putting document to many a consumer. A document that frankly saves money for the Banks and Financial Institutions which should be paid as legitimate compensation to consumers.
Section “C” is divided into four sections – C1, C2, C3 and C4.
The first question in C1 is fairly straightforward. They ask what product the consumer bought the Payment Protection Insurance to cover. The answers to these are such as a personal loan, credit card etc. Not an unreasonable question.
They then ask what the account number was. In many respects that is not an unreasonable question. However, if consumers are aware that they obtained a loan say some 10 years ago and there was a lump sum PPI many consumers do not retain the paperwork. They do not know where to obtain the same and how to obtain it. There is no hint, guidance or direction to the consumer to find out that information. Indeed, without such hint, guidance or direction many a consumer may well look at the document, look for some paperwork which they can’t find and then simply give up. This is not what a consumer should be doing.
Matters however get worse for the consumer. By the consumer I am not simply talking about citizens who have good employment and well educated. I am talking about citizens who although they may be in employment and certainly should have been to obtain finance or credit, who have not had the benefit of the best education and as many in our Society and by that I mean many millions not good with paperwork.
The next Section C2 asks what the reason was for borrowing the money or taking out the credit. That may not be easy if a product was taken out 10 years ago by consumers who have been the victims of modern consumer society in that they have taken out various credit cards and loans to pay off credit card, loans etc., have some difficulty recalling why they took out the loan.
We then come to the two complete bug bears, which in my opinion should never be in the PPI Questionnaire, are close to inappropriate to being in the PPI Questionnaire and in my humble opinion have saved Banks and Financial Institutions millions if not billions of pounds. The scenario is quite simple. The consumer receives the Form. They struggle through to Section C3 and C4, leave the paperwork while they reconsider the same, do the same over a few weeks and then simply do not return it. They effectively give up.
C3 asks “IF YOU BORROWED THE MONEY TO PAY OFF OTHER DEBTS, PLEASE TELL US MORE ABOUT THOSE DEBTS?”.
On the one hand there is a sense in this question as many consumers borrowed money to pay off debts. They regularly did so and hence the chances of a lump sum PPI remaining without being paid off early (without a pro rata rebate) was remote. However, you think about a loan you may have taken out in say 2003. Can you reasonably remember at that time not only why you took out the loan but if you took the loan to pay other credit card loans, who they were? how much was owed? when they were taken out? and when they were paid off? This question verges on the impossible. In practical terms some of us retain paperwork all our days. Accordingly, some of us (and not that considerable a number) have that information. How many others would look at that question with bewilderment, try and think about what they had at the time and try and think of who they paid off. Again, we are talking about prejudice to the more naïve and stressed consumers in this world. Clients who unfortunately either hit a debt spiral and used card to pay off card, loan to pay off loan, or to put it more simply people who are products of the consumer society who borrowed to obtain the fridge freezer, 40” television, new car or whatever was the norm.
What makes this clause totally incredible is that the Banks/Financial Institutions should have that information. The easiest and safest answer is to say “YOU HAVE THIS INFORMATION IN YOUR FILE”. It is entirely true. At the time a loan, credit card or mortgage was taken the Financial Institution could, should and ought to have searched all these details. They should have a note of all the loans or cards that were due to be repaid. On some occasions where there was a loan there was a specific direction that previous cards/loans be repaid and on some occasions the Lenders actually paid them themselves.
How many people, who are not best organised, educated and who are not good with finances would have recalled all that information. Very few. This is a benefit for the shareholders of the Financial Institutions – a negative for the consumer.
We then come across the most ridiculous clause – Section C4 which states “HAVE YOU EVER MISSED PAYMENTS – OR GONE INTO ARREARS – ON THE LOAN OR CREDIT YOU LISTED IN QUESTION C.1”.
The simple answer for those who can budget well is “no”. However, yet again, as we are well aware in the consumer society we live in where the Trust Deed or Insolvency or Sequestration is not uncommon, particularly due to the “credit crunch”, many people would have gone into such arrears.
Why is this question asked?
It is not asked for any good reason. The Bank or Financial Institution does of course have that information. The Bank or Financial Institution sold the product. If it is a Bank they will know whether the loan, credit card or mortgage was in arrears. If a Broker was responsible for introducing the business they can obtain this easily from the Financial Institution.
To ask how many times a payment had been missed as is indicated in Section C.4 is a ridiculous off putting question.
Can you imagine Mr and Mrs Smith sitting in the house having legitimately claimed their PPI was mis-sold. Mr and Mrs Smith are not good with money. They are not good with budgeting. They regularly miss a payment or go into default. They have a loan of £4,000 with a Bank. They have paid approximately £3,000 but are £400 in arrears. They have been in and out of arrears for 5 years. Do we really expect this couple to write down a note of all the missed payments, how much and how much was owed. Why is this question asked when the Bank knows the answer? Why indeed do the Regulatory Bodies allow such a question to be asked. Quite simply, if you have arrears and there is a PPI pay out the Bank or Financial Institution are fully entitled to offset those arrears. What therefore can be a reasonable consequence of a concerned consumer who has had problems with finance. The answer is simple. They will be put off, they will not return the paperwork and the claim will be lost. There is absolutely no reason for such a legitimate claim to be lost. There is no reasonable reason to ask that question. It is off putting, it is insulting, it is embarrassing to many a consumer. It is quite simply unfair.
If you have any misgivings with regards the questions in the PPI Questionnaire, Scottish PPI Expert are here to help you. We offer a ‘No Win, No Fee’ payment structure and have had significant success in the application we have made for our clients in the past having recovered over £80m in compensation claims.Read More
About 45 million policies were sold over the course of 20 years from 1990 – Millions of people have already completed their questionnaires and been compensated and banks have set aside more than £40 billions set aside to cover the payouts and it is believed that many more are yet to come forward.
The figure is expected to grow as complaints continue to be raised, says Citizens Advice.
The scandal saw millions of customers mis-sold insurance policies they were told would protect them against losing their jobs or falling ill.
The policies were supposed to pay off any outstanding loans or mortgages, but many people did not need the policies in the first place, and others were unaware they were even paying for them. Some people were also sold PPI even though their circumstances meant they would not be eligible to claim. So, should these claims be re-assessed?
The impact of PPI has been so significant that in 2012 the OBR stated its economic growth forecast of 0.8% over two years would be mainly due to the impact of PPI fee repayments as people spend their payouts, the major banks have billions set aside for this purpose.
In recent months major banks have said that they are now putting increased sums of money away to cover upcoming PPI compensation payouts.
As well as mis-selling PPI, the Financial Conduct Authority (FCA) has fined some banks for mis-handling people’s complaints. In previous years Lloyds has been fined a record £117 million for mis-handling.
“While regulation and banks’ approach to customer service has improved in recent years the seismic failings around PPI should serve as a constant reminder that firms cannot get away with ripping off customers,” commented Gillian Guy, Chief Executive of Citizens Advice.
At Scottish PPI Expert, we believe the customer deserves the right to a good Solicitor when making a claim, so if you wish to instruct us in any of these matters please e-mail myself who Colin Peter Carr who is a Solicitor and Director of Scottish PPI Expert and Carr Berman Crichton and supervises these cases from our Glasgow Office. We can deal with cases throughout the United Kingdom.
Anyone seeking compensation over mis-sold payment protection insurance (PPI Claims) will now have to make their claims before 29 August 2019. This is the final deadline has been set by the Financial Conduct Authority (FCA) in an effort to draw a line under one of the banking industry’s biggest scandals. If you are thinking of applying, and there are still billions set aside make sure you do so well in advance as we expect that there will be a rush just prior to the deadline date.Read More