FCA to analyse complaints system for PPI

FCA to gather PPI complaints evidence

In late January 2015, the financial regulator, the Financial Conduct Authority (FCA), announced that it was to gather evidence on whether the current complaints system for payment protection insurance (PPI) was working. Specifically, it will consider whether two of its operational objectives are being met: securing appropriate protection for consumers; and enhancing the integrity of the UK’s financial system. Its findings are expected to be published in the summer of 2015.

PPI is the most mis-sold financial product in UK history, and banks, other lenders, credit card providers and brokers have already been forced to pay over £17 billion in compensation to victims of mis-selling. The final compensation bill is expected to top £20 billion.

Depending on the outcome of its investigations, the FCA suggests it may implement some or all of the following:

  • A consumer information campaign regarding the issue
  • Additional rules and/or guidance for firms relating to PPI complaints handling
  • A time limit on PPI complaints

It is the last of these that might raise the most eyebrows. Back in January 2013, the banking trade association, the British Bankers Association, suggested imposing a time limit on when a PPI complaint could be brought, but in February 2014 the FCA said it was not convinced that this would be in the interests of consumers.

PPI complaints need to be considered, regardless of the length of time since the sale of the product, if it is less than three years since ‘the consumer knew, or could reasonably have known, they had cause to complain’. So PPI complaints can still be made, as many PPI policyholders did not realise just how unsuitable their insurance was, and in some cases were unaware they even had the cover.

Whilst the FCA gathers its evidence, firms are expected to handle PPI complaints in the same way as previously.

In its last thematic review on the subject of PPI, in August 2014, the FCA said that it was concerned about whether the complaint handling practices of some the largest sellers of PPI were delivering the correct outcomes for consumers. It was revealed in the review that banks  and other firms that sold PPI had reached an agreement with the regulator to look again at some 2.5 million PPI complaints that may have been either rejected unfairly, or where insufficient compensation was paid.

In February 2013, the Financial Services Authority (the FCA’s predecessor) fined Lloyds Banking Group £4,315,000 for delays in paying compensation to customers for mis-sold PPI. The previous month saw a £113,300 fine for Co-operative Banking Group for placing PPI complaints on hold in the face of instructions from the regulator not to do so.

Whilst both the FCA and the Financial Ombudsman Service report that PPI complaint numbers are falling, it could be many years before the mis-selling saga can be considered as having ended. Letters are still being sent to customers who may have been victims of PPI mis-selling, inviting them to consider making a formal complaint.

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.