PPI scandal: Supreme Court case could ‘open door’ for hundreds-of-thousands of new claims for UK banks

British banks could face a new wave of payment protection insurance (PPI) claims following a hearing at the UK’s Supreme Court.

The Supreme Court will decide whether to expand the reach of a six-year time limit to let thousands more PPI claims be heard in UK courts.

PPI policies cover the costs of debt repayments if policyholders lose their income in the event of an accident, sickness or unemployment.

Millions of Brits were however mis-sold PPI policies after taking out loans and credit cards from the early 1990s to 2010.

Lawyers acting on behalf of the PPI claimants told City A.M. the case could “open the door” to hundreds of thousands of new claims.

Commercial barrister Steve McGerry said “the Smith case, if successful, opens the door to claims who have had historic PPI which ended years ago, but have retained credit or store cards.”

Policyholders who lodged their claims more than six years after their PPI policy ended are currently blocked from seeking compensation.

However, the Supreme Court will decide whether to expand the reach of the six-year limit, by letting claims go ahead if a policyholder continued their relationship with the bank after their PPI policy ended.

The Supreme Court hearing comes after two claimants, Karen Smith and Derek Burrell, filed claims against the Royal Bank of Scotland (RBS) seeking compensation for mis-sold PPI policies.

The hearing comes after the UK’s Court of Appeals in 2021 blocked Smith and Burrell from seeking compensation, in ruling their claims fell outside the six-year statute of limitations.

The claimants are now seeking to overturn the Court of Appeals decision by arguing their continued relationships with RBS, after their PPI policies ended, means their claims should be considered.

Lawyers told the Supreme Court that Smith’s continued use of the RBS credit card until 2015 means her 2019 claim should be included within the six-year statute of limitations – even though she ended her PPI contract in 2006.

Smith entered into the contract with Direct Line after ticking a box on the credit application form, next to the words: “We strongly recommend you take out this cover. For cover just tick this box.”

Monthly premiums were later charged to Smith’s credit card bill, before she terminated the PPI contract in March 2006. RBS received a more than 50 per cent commission on those PPI payments.

The court’s decision could reopen the PPI scandal and see banks forced to pay out billions to thousands more customers who were mis-sold the insurance policies.   

UK banks have now repaid more than £38bn to customers who were mis-sold the insurance policies, Financial Conduct Authority (FCA) data shows.  

The Supreme Court case, Smith and another vs RBS, is one of a series of cases seeking to expand the reach of PPI claims.

RBS was approached by City A.M. for comment.