This article originally appeared in Motor Finance magazine in September 2016.
In August, the Financial Conduct Authority (FCA) published its response and a further consultation (CP16/20) on its proposals regarding the handling of Payment Protection Insurance (PPI) mis-selling complaints in light of the Supreme Court decision in Plevin v Paragon Personal Finance Ltd. Its proposals were set out in CP15/39.
Following the feedback on its initial proposals from firms, trade bodies and consumer organisations, the FCA has confirmed its intention, subject to some proposed changes, to implement its earlier proposals. The FCA believes the proposed measures will help bring finality and certainty to PPI claims and enable firms to take a fair and consistent approach.
The FCA's response affirms:
- The 50% tipping point for commission being deemed unfair - this assumption can be rebutted.
- The means of calculating redress, being the difference between the actual commission paid and the fair commission of 50%. Historic interest paid by the consumer on that sum and simple interest at 8 percent per annum will also be payable.
- Its proposals for an FCA led communication campaign over the two years preceding the deadline to raise consumer awareness of the deadline, how to check if they have a valid PPI complaint and explain how to make a complaint. The budget for the campaign is £42.2 million. The FCA concluded that to require individual firms to send out communications to all identifiable PPI customers would be impractical, disproportionate and hard to justify.
The proposed changes following the feedback, and upon which further feedback is sought relate to three key aspects of its proposals being:
- Profit share sums as well as commission amounts will be included for the purposes of assessing fairness and redress.
- How fairness and redress should be assessed where commission or profit share rates varied during the life of the PPI policy.
- That sums rebated to a consumer who cancelled a single premium PPI policy early should be included in, and so reduce, any redress due.
The FCA's proposed rules and guidance will, subject to this further consultation, be published in December 2016 and come into force by the end of March 2017.
The rule setting the PPI complaints deadline will come into force 6 months after it is made, so by the end of June 2017 with the communication campaign starting at the same time. The deadline for submission of PPI mis-selling complaints will expire two years later in June 2019. Consumers who fail to complain by the deadline will lose the right to have the complaint assessed by the firm or the Financial Ombudsman (FOS). The FCA proposes however that, as is currently the case, the FOS can deal with complaints submitted after the deadline if there is exceptional circumstance or the firm agrees to it.
It is expected that the communication campaign will see a rise in the number of complaints submitted, including, potentially, speculative complaints. Firms will need to consider the operational challenges (and financial pressures) that such an increase will impose upon them.
Further feedback and responses to CP16/20 can be submitted until 11 October 2016.