A landmark court ruling in November 2014 regarding the Plevin v Paragon case could end up costing UK financial companies up to £33bn if the ruling is applied across the industry, Reuters has reported consultancy Autonomous as saying.
Reuters claimed to have seen a copy of research from the firm, giving the headline figure as a worst case scenario.
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This would surpass the compensation costs British banks have already faced for miss-selling PPI, with the amount set aside currently hovering at approximately £26bn.
The Plevin v Paragon case refers to a case brought up by Susan Plevin over a policy she was sold in 2006. When Plevin took out a £34,000 loan, she also took out PPI, with a premium of £5,780. This premium included a sizable commission (71.8% of the premium) paid to Paragon and a broker, which Plevin was not informed about. She took this to court, and in November it was ruled that Paragon had breached the Consumer Credit Act by failing to inform the customer of the commission.
According to Reuters, Autonomous said this could potentially open up a new angle for PPI miss-selling claims, based on commission payment as opposed to policy.
"If applied to other products (e.g. store cards and auto finance), this case could lead to a whole new wave of consumer claims for the UK banks, with a bill which could be even higher than the current PPI tally," the research was quoted as saying.
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By GlobalDataThe research was said to say that if 50% of customers claimed, in line with response rates on PPI, the cost would be £17bn.
"There is, in our view, a small but very real risk that the implications of the Plevin judgement could quickly snowball into a much bigger issue, beyond PPI", Reuters quoted the research as saying.
