UK banks may have to pay out billions in mis-sold payment protection insurance PPI compensation. 

The miss-selling scandal has already cost British banks up to £30 billion, which covered repayments in circumstances such as redundancy, illness or death.

A court ruling has suggested that even if PPI policies were not mis-sold, consumers may still be able to reclaim due to the excessively high commissions paid.

The ruling is a blow for banks with RBS paying out almost £5 billion, Barclays over £9 billion and Lloyds £18.8 billion for miss-selling claims.

“This ruling is hugely significant and sets a new precedent,” said Simon Evans, the chief executive of the Alliance of Claims Companies.

“I’ve seen a figure of £18 billion as the extra amount that could be paid out as a result of this ruling. But that might be too conservative. It could be as high as £30 billion,” he added.

A time-bar of June 2019 has been set by the Financial Conduct Authority.

The case that took place at Manchester county court was between couple Christopher and Joanne Doran against Paragon Personal Finance and revolved around the amount of commission paid.

The Plevin rule states that if over 50 percent of a consumer’s PPI’s payments went as commission, they can claim back payments above that threshold, plus the interest.

Banks were paid an average of 67 percent commission, meaning that millions of people sold PPI are entitled to money back.

Paragon Personal Finance said: “We believe this decision is at odds with other cases heard recently and does not create a precedent. The Doran case is one of a handful of legacy cases for Paragon and we are considering our position regarding appeal.”