In a recent development, the Royal Bank of Scotland (RBS) has lost an appeal over unfair commissions charged to customers who were sold payment protection insurance (PPI), potentially increasing the bank’s exposure to litigation over the long-running scandal. The decision was made by the United Kingdom’s Supreme Court, which unanimously allowed an appeal brought by two former customers of RBS.
This ruling means that the earlier decision that RBS must repay all the money paid to one of the customers for PPI, with the exception of any redress already paid, has been upheld. However, the case of the second former customer is still ongoing.
The mis-selling of loan insurance, or PPI, has been one of Britain’s most expensive retail financial scandals, with banks paying out approximately £40 billion ($52 billion) in compensation. PPI policies were sold from the 1970s onwards, with the bulk of sales occurring between 1990 and 2010. Although there was a Financial Conduct Authority deadline for PPI claims in August 2019, claims can still be made in court.
This latest ruling by the Supreme Court has the potential to widen the number of PPI mis-selling claims faced by lenders, which was a concern expressed by RBS’s lawyers during the appeal. A spokesperson for NatWest Group, the parent company of RBS, stated that the decision recognized the need to assess claims on a case-by-case basis and emphasized that judges have discretion over whether to allow claims to proceed. The spokesperson also stated that the bank would continue to handle PPI claims fairly and reasonably, based on their individual merits.
The former RBS customers involved in the case each had a credit card with the bank and were sold PPI, without being informed that a significant proportion of the money paid went to RBS as commission. One of the key arguments made by the bank was that the lawsuits should be thrown out as they should have been brought within the usual six-year limitation period for civil claims, starting from the date the last PPI payment was made. However, the Supreme Court ruled that the unfair relationship between RBS and its former customers continued until their credit card agreements ended, and therefore the claims were brought within the appropriate timeframe.
This ruling could have significant implications for RBS and other lenders involved in the PPI scandal, as it opens the possibility for more customers to bring claims for unfair commissions. As the fallout from the mis-selling scandal continues, it remains to be seen how lenders will handle the increased exposure to potential litigation.