© Reuters. FILE PHOTO: A worker cleans the glass exterior next to the logo of RBS (Royal Bank of Scotland) bank at a building in Gurugram on the outskirts of New Delhi, India, September 8, 2017. REUTERS/Adnan Abidi/File Photo
LONDON (Reuters) – Royal Bank of Scotland (LON:) (RBS) on Wednesday lost an appeal over unfair commissions that were charged to customers who were sold payment protection insurance (PPI), potentially increasing lenders’ exposure to litigation over the long-running scandal.
The United Kingdom’s Supreme Court unanimously allowed an appeal brought by two former customers of RBS, part of British bank NatWest.
The decision means an earlier ruling that RBS must repay all the money paid to one of them for PPI, less any redress the bank has already paid, was upheld. The case of the second former customer continues.
Mis-selling of loan insurance, or PPI, was one of Britain’s costliest retail financial scandals, with banks paying out around 40 billion pounds in compensation.
PPI policies started to be sold in the 1970s, with the bulk sold between 1990 and 2010. Claims were subject to a Financial Conduct Authority deadline of August 2019, but can still be made in court.
Wednesday’s ruling could widen the number of PPI mis-selling claims faced by lenders, a concern expressed by RBS’s lawyers at the Supreme Court appeal in January.
A NatWest Group spokesperson said the decision “recognised that claims should be looked at on a case-by-case basis” and emphasised that judges have discretion over whether to allow claims to proceed.
The spokesperson added the bank will continue to deal with PPI county claims “fairly and reasonably, and in accordance with their individual merits.”
The former RBS customers each had a credit card with the bank and were sold PPI, but were not told that most of the money paid by them for PPI went to RBS as commission.
“Even to this day RBS has not revealed the exact size of its commission but it is now known that its commission was well over 50% of the payments made,” Judge George Leggatt said in a summary of the court’s decision.
The bank argued that the two lawsuits, which were both filed in 2019, should be thrown out as they should have been brought within the usual six-year limitation period for bringing a civil claim, from the date the last PPI payment was made.
But the Supreme Court ruled the relationship between RBS and its former customers continued to be unfair until their credit card agreement ended, meaning the claims were brought in time.
(This story has been corrected to say ‘two lawsuits’ not ‘an appeal’ in paragraph 1 and show that only one of two former customers must now be repaid in paragraphs 2 and 3)
