New PPI gold rush: Ruling on hidden fees may spark millions of fresh payout claims... even from people who were happy with their policy

Millions could make fresh PPI compensation claims after a series of court rulings.

Banks have already been made to fork out £38billion for mis-selling payment protection insurance (PPI) to customers, with the deadline for free claims passing last year.

But the banks could now face demands for more payouts – even from people who were happy with their policy – after courts found the products were ‘unfair’.

The rulings centre on huge commission fees paid to the banks by insurers, which were never disclosed to customers.

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Millions could make fresh PPI compensation claims after a series of court rulings on hidden fees

Commission accounted for more than 95 per cent of the policy’s cost in the most serious cases, according to The Sunday Times.

A Supreme Court ruling previously found that a PPI product sold to a widowed college lecturer, Susan Plevin, was ‘unfair’ because she had been ‘left in ignorance’ about its 72 per cent commission fee.

Q&A: Payment Protection Insurance (PPI)

Why is PPI a problem?

Payment protection insurance policies were designed to cover repayments on loans and credit cards if a borrower was made redundant or found themselves unable to work. But many buyers of PPI policies did not know what they were buying, or might not have been entitled to claim.

What was done about it?

The compensation floodgates opened in 2011 when the banks lost a landmark court case, spawning an army of claims management firms. In a bid to draw a line under the saga, the Financial Conduct Authority (FCA) set up a free-to-use claims process and imposed a deadline of last August.

So what’s new?

Recent court rulings have potentially opened the door to yet more claims. Using a 2014 Supreme Court ruling, centred on commission fees paid by insurers to banks, a small number who bought PPI have successfully argued that their policies were ‘unfair’ and clawed back their cash.

What could happen?

The ruling could pave the way for millions of new compensation claims. But fresh claims, including by those who have already received partial refunds through the FCA scheme, would have to be made through the courts.

 And experts said more recent legal claims made against banks could pave the way for millions of new compensation claims, including from people who were denied payments, received only partial refunds or never claimed under the previous scheme.

This is regardless of whether the PPI policy was suitable for a customer or they were happy with it.

As many as 64million PPI policies were sold, mostly between 1990 and 2010, with some 32.4million claims made so far – meaning millions could still be in contention.

The policies were marketed to cover repayments of loans, mortgages and credit cards if customers were unable to do so. 

But they were often sold to people who were unable to claim or already had cover, or without their knowledge.

NatWest lost a case earlier this year after a £1,500 claim was made against it. 

Store manager Karen Smith, 58, from Cornwall, received an unsolicited refund from the lender worth £529.80, representing ‘a refund of commission over 50 per cent charged on the PPI premiums paid’.

She had not realised she was paying commission and so took NatWest to court to claw back more money. 

At Bodmin County Court, District Judge Jonathan Stone said the bank ‘provided no information to Mrs Smith that would enable her to discern that it would be receiving commission’, but it knew how much commission it would receive.

‘The inequality of knowledge was total and as a result, of course, the relationship was unfair,’ he added.

NatWest is appealing against the decision. 

A similar claim for £7,954 against Citibank was recently upheld by the High Court but is also subject to an appeal. 

In that case, a customer discovered that commission accounted for 95.2 per cent of her policy’s cost.

Martin Richardson, director of legal services at solicitors MoneyPlus Legal, said new claims against the banks could potentially amount to ‘billions of pounds’.

The Financial Conduct Authority ran a compensation scheme for PPI until last August. 

Under that, banks were told to refund commission above 50 per cent, but the recent court rulings have ordered them to hand back more than this.

A NatWest spokesman said: ‘This case is the subject of an appeal and so it would not be appropriate to comment further.’ Citibank could not be reached for comment.