A broker is taking legal action against Paymentshield, alleging that its decision to cut his trail commission from 27 per cent to 5 per cent is a breach of contract.
In October, Paymentshield told a number of brokers that their commission would fall to 5 per cent from November as they had not submitted any business in the past 12 months.
The insurance provider said at the time that such firms had become dormant and were therefore subject to a dormancy clause in its terms and conditions.
But D&D Consultants director David Nicholson alleges the contract is unfair and would have no standing in court because it fails to define the term dormant agency or to publish dormant agency rates. He says: “This clause has no defined terms and is therefore open to interpretation and as such constitutes an unfair contract. I am informed by my solicitor that it would not stand up in court.”
Nicholson has been in correspondence with Paymentshield for some weeks and after his latest letter threatening legal action went unanswered for more than seven days he instructed his solicitor to begin legal proceedings last week.
A Paymentshield spokeswoman says: “Since Mr Nicholson has decided to seek legal advice, we are unfortunately unable to comment on his specific situation.”
Paymentshield has told brokers that they can reinstate their commission to its original rate if they submit one policy per month for six months to the firm, as that would mean they would no longer be classed as dormant.