By Nick Baxter
23rd July 2018
 

Doran v Paragon Personal Finance

The Financial Conduct Authority [FCA] was clear when it issued its final rules and guidance in respect of Payment Protection Insurance [PPI] complaints [policy statement PS17/3] that it did not “seek to usurp the prerogative or discretion of the courts”. In fact, the FCA was almost pedantic in its re-enforcement of consumer rights by stating, “Consumers will remain free to go to the courts, including if they desire the kind of assessment a judge would undertake.” It is not disputed that the FCA was trying to achieve a balanced outcome; a “fair alternative” that “may help avoid an increased flow of cases to the courts, with all of the challenges and costs that might involve for consumers and firms.”

FCA approach rejected

The problem is the ‘Plevin calculation’ has swung the ‘unfair balance’ away from the consumer and too much to the product provider; and Courts, like the Manchester County Court agree. As His Honour Judge Pearce concluded, “I have rejected the FCA approach to the calculation of loss and it would not it seem to me be right”.

The ‘tipping point’ dilemma

In a nut shell, the ‘tipping point’ dilemma surrounds undisclosed PPI commission and whether a consumer decision to purchase the PPI product would have been different had they known about the size of the commission the seller was to receive. In the Doran case, the Judge identified “the gross commission” as “just over 76%”. The FCA considers a ‘tipping point’ in respect of an unfair relationship as 50% and redress is based on the percentage above that figure. So, in this case the redress would be based on the 26% above 50% only. HHJ Pearce was, however, “far from satisfied” that this was the ‘proper approach’ and awarded full redress on the 76% figure.

Hidden High Commission

Like Doran, and other cases going through the Courts, many consumers feel ‘wronged’ by the levels of hidden high commission and do not feel the FCA approach is appropriate. As a result, unless additional guidance with a more balanced outcome is issued thousands of consumers may opt for a Court led route to compensation.