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What Are Loan Lenders Commissions Refunds? How Do They Work?

Money Savings Advice Loan lenders commissions refunds

Loan lenders must make clear any commission they are paying to your credit broker. If they don’t, then you may be able to claim the money back, as your loan may have been mis-sold to you.

If you’ve taken out a loan through a credit broker, the broker needs to be paid. Generally, instead of taking money directly from you, they are paid via commission from the lender.

Can I Claim Compensation for Illegal Commission Fees?

If you borrow from a lender that is paying your broker commission that you aren’t aware of, or they break any other rules around loan commissions, you might be entitled to claim back some of the money you’ve paid.

However, that raises a number of questions, including whether the broker is actually looking for the best deal for you, or if it’s just one that’ll make them the most money.

Because of that, you should always have a clear understanding of what commission they are being paid to help you make an informed decision.

If your lender is paying your broker commission that you aren’t aware of, or they break any other rules around loan commissions, you might be entitled to claim back some of the money you’ve paid.

Read on to learn more about how loan commission fees may lead to refunds for you.


When the Commission Is Completely Hidden

Once you’ve worked with your credit broker, either by filling in a form online or by running through some questions in person, they will recommend a lender to you who will give you their full lender agreement ready to sign. This is your loan contract and determines how much you’re borrowing and how much you’re repaying.

It should also make clear whether a commission is being paid to your broker. If during your application process, you aren’t clearly told about your broker being paid a commission fee then it is illegal, because you’re not aware of the fact that your loan repayments are enabling the broker to be paid.

Look back over your application process. Check your loan agreements. If you cannot find any evidence of a commission being paid, but you know that you used a broker, chances are the commission details have been withheld from you. And if that’s the case, you can argue that your loan was mis-sold to you and that you have a right to claim back the money that was paid as commission.

Your lender and broker are legally bound to inform you, in full, of the details of the commission fees involved in the contract. Get in touch with our mis-sold loan specialists if you feel that you have a loan agreement that may have included commission you weren’t aware of.


The Plevin ruling is named for Mrs Susan Plevin. She set up a loan with Paragon Personal Finance with Payment Protection Insurance (PPI). However in 2014, she discovered that a large amount of her PPI payments were being used as commission – in fact, 71% of the money she’d paid towards PPI was commission, with only 29% used to insure her loan repayments. It was a huge sum too – her PPI cost her over £5,000 but without the commission would only have cost her £1,600.

Mrs Plevin took her case to the Supreme Court, claiming she would not have bought the policy had she known this in advance. She won, and so the Plevin ruling was created where any undisclosed high commission fees could be claimed back by the customer. “High commission” was defined as anything over 50%, and considering the average commission paid on many financial products is 67%, it left open a lot of potential for customers to get their money back, with interest paid too.

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When You Aren’t Aware You’re Dealing With a Credit Broker

Another situation where you may be able to claim a refund on any loan commission paid is if you didn’t even realise you were dealing with a credit broker in the first place. This is particularly common online – you’ll be searching for a personal loan, find a website which will ask you the normal affordability questions and then make you an offer. However, they’re actually making the offer on behalf of the lender, not directly as the lender, knowing that you will be accepted based on the questions they’ve asked you.

These days it is not a hugely common problem – most brokers are aware that the potential risks of scamming you into believing you are a lender. At worst, a contemporary broker may normally lull you in with an initial website that is vague and sounds like a lender’s website, but once you’ve filled in your details and agreed to be contacted, will then reveal they are looking for the best deal for you.

However, you may have an older loan with a broker that wasn’t this careful, or you may have just encountered a disreputable one who wanted to make you believe they were the lender.

If that was the case, then you certainly wouldn’t expect commission fees to be paid – as far as you were aware, you had a contract directly with a lender. So if you feel you’ve been sold a loan by a broker without realising it, we can certainly help you reclaim the money they were paid as compensation.



When the Commission Amount Is Undisclosed

Sometimes you might know that commission is involved in your loan agreement, but you don’t know how much. As far as you’re concerned, it doesn’t affect your end of the loan so why would you need to know, correct? Actually, that’s wrong – lenders don’t just pay brokers freely, and they’re paying them from the money you repay as interest. So if they’re paying a lot of commission, how do you know if you’ve got the best deal?

That’s why you’ve a right to know whether the commission fees being paid for your loan are too high. This all relates back to a case brought by a Mrs Susan Plevin against Paragon Personal Finance and her broker. That was related to PPI rather than loan commission fees directly, but the principle is the same – she had no idea so much of her money wasn’t actually for her financial product but was merely commission for the middle-man.

It turned out, only 29% of the PPI fees she paid were for the policy, with the remaining 71% used for commission. She won her case in the Supreme Court and was refunded, setting up the Plevin ruling as a result.

Because of the Plevin ruling, you may be able to make an argument that, if your loan commission fee is excessive, you were mis-sold your loan. And if you don’t know the amount then it’s important you find out. Commission paid just on your loan is unlikely to be considered too high by the Financial Conduct Authority – your lender is hardly going to be paying more than half of their interest to the broker – but if you paid any kind of loan setup fees, then you may have a case.

When Commission Was Illegally Retained

You have a legal right to change your mind if you take out a loan. That’s because many people act under mental duress, and make take out a loan while panicking about their financial situation. As long as you inform the broker and lender within 14 days, you can cancel the loan, repay the funds and receive a refund of any commission or setup fees paid.

If the broker doesn’t repay that amount to you within 30 days, then they are illegally withholding it, and you can certainly claim to get the money back through the Financial Ombudsman Service. Also, if a broker introduces you to a loan and charges a fee, but you then decide not to sign the agreement, the broker can only withhold £5 and must return the rest, under the Consumer Credit Act 1974.

When You Are Eligible to Claim

You may read these scenarios and realise that, on reflection, there is a high likelihood that you have taken out a personal loan where the commission was paid without you either being aware of it or without you knowing just how much was paid. Or, you may have no idea whatsoever, but you want to know more detail to determine whether there’s a chance you have a refund due to you.

If you’ve taken out a loan knowingly via a broker or you think that maybe you did use a broker without realising, we can help you identify whether you’ve potentially got a case to get a refund of your loan lender commissions. Our mis-sold loan specialists can examine your agreement and talk you through the application process before giving honest, fair advice on the best way to progress.

Should I Use a Claims Management Company?

While you are quite within your rights to apply for compensation without third-party assistance, sometimes it pays to use the services of an experienced claims management company. They have been there, done it and know the information required to secure compensation as quickly as possible. They also know your rights, the correct process and they will not be misdirected with technical industry jargon.

How Do I Make a Claim and How Much Does to Cost?

In the hands of an experienced claims management company, it is more a case of asking the right questions of broker/lenders. As long as you have the relevant paperwork detailing your contract, commission and any arrangements with third parties, this should give you enough evidence to pursue a claim.

If a lender has sold you a financial product without disclosing commission payments and arrangements with connected third parties, you should have a very strong claim for compensation. In order to pursue your claim, a claims management company would look to secure a share of any compensation awarded. This would tend to be around 25% on average, although it can vary from case to case.

Money Savings Advice Tip

If you feel you have been a victim of undisclosed loan commission fees then getting specialist advice from compensation specialist is certainly worthwhile route to go down. We would recommend speaking to a compensation specialist who works on a no-win-no-fee basis meaning you are not further out of pocket.

What Is a “No Win No Fee” Arrangement?

This is one of the most common ways to pursue financial compensation for mis-sold products or personal injury claims. In effect, your claims management company will take on your case, and associated costs, but in exchange, they will request a success fee. As we mentioned above, this tends to be on average, around 25% of any compensation awarded.

Holding Third Parties to Account

The “no win no fee” arrangement has been a game-changer for the industry and for consumers. First of all, it offers consumers a way to apply for compensation using those who have experience of these scenarios.

Secondly, and this is often missed, it ensures that third parties who have mis-sold financial packages are held to account. Unless these parties are held to account, it is difficult to see why they would make any changes to their procedures and services going forward. Others will suffer the same fate as you!

How Do I Know My Lender/Broker Has Not Been Influenced by Commission Payments?

Aside from doing your own research, and checking the small print of similar financial arrangements, you could approach a couple of brokers to see who comes up with the best deal. Even though the regulators are now clamping down on undisclosed/unauthorised commission payments, it still pays to shop around for the best deal.

Is There a Time Limit for Claiming Compensation?

In a traditional scenario, you have a three-year window of opportunity from the day you were mis-sold a financial product to make a complaint. It is worth noting that you don’t need to have resolved the complaint during the three-year window of opportunity, just made a formal complaint.

Indeed, where it has not emerged until further down the line that you were mis-sold a financial product, you may be able to extend this three-year window of opportunity. It may be that the courts/regulators will allow you to reset the time limit from the moment you found out you were mis-sold a financial product.

Quick Mis-Sold Commissions/Plevin FAQs


Quite simply, loan commissions and the use of credit brokers exploded in popularly in the very early 1990s. For 18 years, the lenders and brokers offered thousands of loans to customers without the consideration that their commission fees could cause them problems further down the line.

When you take out a loan with a broker, the lender will make a payment to the broker as a sort of finders-fee. However, they won’t do this out of their own pockets but will instead be charging it to you, even if it isn’t immediately obvious. Whether that’s a slight increase interest rate based on the fact you’ve applied through a broker or a simple loan setup fee, you’ll have to pay more to cover the cost that is then passed on to the broker.

If you take out any finance directly with a lender then the process is usually pretty simple – you get given your loan amount, and you’ve an interest rate which builds on your unpaid balance which gives the lender back their value as you repay more than you originally borrowed. That’s why a lender operates, to make money on interest repayments.

One of the ways that a broker can act illegally is by mispresenting themselves as the lender. They may do this for a number of reasons, but usually, it is either to hide the fact that they are getting commission, or it is to prey on people who might have a poor credit score and who are looking for a lender who might be more supportive to their case.

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How Can Money Savings Advice Help You With Making a Mis-Sold Commission Claim?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Financial Claims management companies. They have already helped thousands of people claim compensation for mis-sold financial products and they can do the same for you.

Choosing an independent claims management company means they won’t proceed with a claim unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these claim management companies who can help you make a compensation claim, then click on the below and answer the very simple questions.

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

Len Burgess

Len Burgess is a professional financial writer who over the last five years has written hundreds of articles for all financial sectors. Len founded Money Savings Advice with the aim of helping consumers navigate their way around the financial world by providing easy to understand financial information and matching consumers with the best financial advisor based on their personal information.

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