Banks could potentially have to fork out billions more on mis-sold payment protection insurance (PPI) claims following a legal ruling yesterday.

Many of the UK’s largest banks have already spent around £30bn compensating those customers who were mis-sold PPI, an insurance scheme designed to cover repayments in circumstances such as redundancy, illness or death.

Christopher and Jane Doran said that they were entitled to compensation over the commission earned by their provider Paragon Personal Finance, which they claimed was not disclosed to them, under the “Plevin” rule.

The FCA had advised banks that only commissions above 50 per cent of the premium value were unfair, and they should only pay out the difference above that benchmark. However, Paragon was then ordered to pay the full 76 per cent of the PPI premium.

A Paragon Banking Group spokesperson said that the bank was considering an appeal. The FCA said it accepted that courts may take a “variety of approaches to redress on individual cases”, but in this situation, its approach was “fair and appropriate”.

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