12
Nov 2014

Plevin PPI: Where It All Began

Plevin PPI: Where It All Began

Plevin v Paragon Personal Finance Ltd

In 2012, retired College lecturer Susan Plevin took legal action against Paragon Personal Finance Ltd (Paragon) after she found that 71.8 % of the PPI premiums she paid had nothing to do with protecting her.

Susan had taken out a loan of £34,000 with Paragon, on top of this she was persuaded to take out a PPI policy at an upfront cost of £5,780. However, the PPI policy was only worth £1,630 with the remaining £4,150 being kept by Paragon and the broker by way of commission. Susan was not informed of either the amount or the recipients of the commission.

Susan argued that the failure to disclose the high level of commission earned created an unfair relationship. She believed that the premiums she paid for her PPI policy should be returned as had she known that such a large amount of what she was paying was commission she would not have decided to have taken the PPI policy.

In 2014, Susan’s case against Paragon was heard by the Supreme Court. The Court ruled that where a Lender or other provider hid large commissions from a consumer, this created an unfair relationship between the Lender and the consumer under the 1974 Consumer Credit Act.

The case was heard in front of five Judges in the Supreme Court, when giving the leading judgment Lord Sumption stated:

“Any reasonable person in [Susan’s] position who was told that more than two thirds of the premium was going to intermediaries, would be bound to question whether the insurance represented value for money, and whether it was a sensible transaction to enter into. The fact that she was left in ignorance in my opinion made the relationship unfair.”

Want to know more? You can read the full judgment here: https://www.supremecourt.uk/cases/docs/uksc-2014-0037-judgment.pdf

As the Supreme Court is a superior Court in the United Kingdom, any decision made by this Court is binding on an inferior Court (i.e: the County Court or Court of Appeal), meaning that these Courts have to follow the premise of Lord Sumption’s judgment when assessing this type of Claim.

After the ruling, the Supreme Court passed Susan’s case back to the County Court to consider the appropriate remedy. The County Court ordered that Paragon refund the full amount of the 71.8% commission paid, plus 8% compensatory interest.