The Financial Conduct Authority (FCA) has announced it is to consult on a deadline for future PPI complaints by the end of the year.
The regulator says it does not expect the new rule to come into force until the spring of next year and the proposed cut off date will be two years from the day the rule comes into effect.
But its advice on future claims at the end of a statement on the deadline says: “Consumers who intend to complain about PPI should do so as soon as possible”
Finality and certainty
The lengthy FCA statement says it believes a deadline would ‘help bring finality and certainty’ to the on-going PPI saga.
The statement adds: “The FCA now considers there is a case for intervening further in PPI and that introducing a deadline and running a communications campaign would:
- Prompt many customers who want to complain, but have not yet done so, into action, resulting in them potentially getting redress sooner and giving some of them the opportunity to pay off costly debt.
- Bring the PPI issue to an orderly conclusion, reducing the uncertainty for firms about long term PPI liabilities and helping rebuild public trust in the retail financial sector.
It is not clear how many potential PPI mis-selling claims remain to be made, but the FCA’s own figures suggest that 45 million PPI policies were sold between 1990 and 2010 and the banks have dealt with around 14 million claims so far.
Advising consumers what to do, the statement says: “Consumers who are unhappy about PPI should continue to complain to the firms concerned and to the Ombudsman if they are not satisfied with the response.”
It concludes: “Consumers who intend to complain about PPI should do so as soon as possible”
The FCA has been running an investigation into the way the industry has been handling PPI complaints since January, following two record fines for banks mishandling PPI claims made against them and the high number of unfair rejections being overturned by the Financial Ombudsman Service (FOS) on appeal.
The banks have been lobbying for a deadline for many years since losing the High Court judicial review into PPI complaints in 2011. A previous attempt in 2013 with the former Financial Services Authority (predecessor of the FCA) failed after vocal opposition by consumer groups.
Included in the deadline consultation will be potential changes in the rules and guidance for PPI investigation following the landmark Plevin case in the Supreme Court last November. Any claims made under that rule would be subject to the same deadline, the statement says.
The industry is keen to see what the possible outcome will be of the Plevin decision as it could open up a whole new area of PPI complaints. The Supreme Court decision held that a PPI policy could be mis-sold if the consumer wasn’t advised at the time that a substantial percentage of their premium would be paid in commission and not the cost of their cover.
The banks have already set aside more than £26 billion for successful PPI claims, with £20.8 billion already paid out, but a report by Autonomous Research has projected an additional £33 billion compensation bill if the Plevin ruling is applied across the financial sector.
Rules and guidance
The regulator said it considers the proposed rules and guidance to be included in the consultation ‘would reduce uncertainty and enable firms to take a fair and consistent approach to handling PPI complaints, whilst making it easier for the FCA to act if it becomes concerned that firms are not handling PPI complaints appropriately.’
The consultation paper will be published before the end of 2015 and will include full details of proposed rules and guidance ‘in the light of the Plevin decision.’