03Dec

The Financial Conduct Authority (FCA) has commenced a consultation into two significant changes it is proposing to make regarding payment protection insurance (PPI): a ‘time bar’ or deadline on when complaints about the product can be made, and new rules that will allow complaints to be made regarding the size of the commission paid on PPI policies. The latter follows the recent Supreme Court judgement in the case of Plevin v Paragon Personal Finance.

The FCA has still not proposed an exact date in 2018 for its PPI deadline. But consumers will be entitled to have their complaint assessed if the authorised firm sends its acknowledgement letter prior to the deadline.

At present, the Financial Ombudsman Service (FOS) will consider any PPI complaint made within six years of the sale, or if later, within three years of a customer realising they may have a problem with their PPI. These timescales will not be extended as a result of these proposals, so if a customer’s existing right to complain expires in 2017, then this will remain the case. Likewise, all customers who are dissatisfied with their firm’s adjudication of the complaint will still have only six months to refer the matter to FOS, regardless of when the firm’s final response is sent.

Some PPI policies are still being sold today, even though the sector is far smaller than was the case in the 2000s, and the policies being sold at present are typically regular premium plans offered by specialist insurers. The consultation acknowledges that the product continues to be sold, by saying that any plans sold after a certain date in 2016 will be exempt from the deadline.

The deadline will only apply to complaints made about the sale of PPI, so complaints regarding administration and claims handling, for example, are not affected by these proposals.

Regarding commission payments on PPI, the FCA proposes that where firms failed to disclose the size of the commission payment, and where the commission amount was sufficiently large to create an ‘unfair relationship’ under contract law, that firms should be required to pay compensation to customers who complain. This redress would comprise the amount by which the commission on the plan exceeded 50% of the premium, plus the interest paid on this excess, plus an additional 8% of the total of these two elements.

There is no requirement to conduct a historic review of previously rejected PPI complaints regarding this issue. In addition, firms will not need to uphold commission-related complaints if they have already paid full redress on a mis-selling claim regarding the same policy. These types of complaints must also be made prior to the deadline.

The consultation document suggests that the proposed 50% threshold may yet be altered. However it is unlikely there will be any significant changes to the proposals regarding either the 2018 deadline or the rules on handling commission-related complaints.

The consultation ends on February 26 2016.

The 18 firms that sold 90% of the PPI policies have also been informed that they will need to fund a £42.2 million campaign – to take place in 2016 – aimed at raising public awareness of the deadline, and at informing customers of how they can check if they have had PPI. This campaign will involve TV commercials, billboards, direct marketing and digital advertising.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.