FCA kick off campaign to clear PPI confusion

Credit: Piotr Swat/Shutterstock.com

The FCA are launching the campaign to coincide with the two-year run up to the deadline for PPI claims, which falls on August 29th, 2017.

As part of this campaign they've stated the possibility that a majority of people are "still to claim" for any payment protection insurance (PPI) policy they may have been mis-sold in the past, with approximately 64 million policies having changed hands prior to the introduction of new rules in 2011.

Yet given the conjectural nature of their suggestion that a majority of people may still be due to claim, and given that the true number of affected customers has never been established with any real certainty, their campaign underlines how their deadline is to a significant extent an attempt to inject clarity into an area where there is and has been none.

Background

For those lucky enough to have escaped hearing about it or being cold called by a claims company in the past seven years, PPI is a form of insurance that, between 1990 and 2010, was more or less automatically bundled with a variety of financial products, particularly those involving credit and loans.

In theory, it's meant to provide cover to customers in the event of any unforeseen circumstance that would make it difficult for them to repay their debts.

Yet in reality, it was often sold when it wasn't needed, sold aggressively, sold without sufficient explanation, or sold without the customer being made aware that the seller was making a hefty commission from its sale.

The FCA currently believe that as "many as 64 million PPI policies have been sold in the UK, mostly between 1990 and 2010", yet there isn't unanimous clarity or agreement on the exact number.

In 2012, for instance, the organisation which preceded the FCA - the Financial Services Authority - told Parliament that they estimate the total number of policies sold at 53 million, and that the British Bankers' Association put the figure sold by banks at 45 million.

In other words, the total figure has been semi-regularly revised (mostly upwards), underlining the lack of precision or certainty as to the total number of policies and affected customers.

Billions

This lack was also recently underlined by the recent financial results of the big banks, with Lloyds and Barclays both setting aside an additional £700 million in the second quarter in order cover what they expect to be rising compensation costs.

Given that the UK's major banks had already set aside over £43 billion to cover compensation claims, and have already paid out £27 billion, this extra allocation of funds must have come as a financial blow to them.

Source: New City Agenda

Not only that, but the regularly rising costs underline how, some seven years after the PPI scandal first broke, they still don't have a reliable handle on how much they really owe.

Or to put it differently, they still don't have a handle on the full scale of their own misconduct and impropriety, which is arguably part of the reason why the FCA introduced the August 2019 deadline in the first place.

Clarity begets uncertainty

As UK Finance - the body which represents Britain's banks - say, "We fully support the introduction of the FCA's PPI mis-selling deadline."

They gone on to add that the "regulator's deadline for PPI complaints provides additional clarity for consumers", yet it's likely that the clarity is being provided for the sake of the banks themselves, who are seeing their profits and growth estimations dented by the need to continue writing off yet more cash.

That the intended clarity isn't especially meant for consumers is indicated by how, among other things, the claims management company (CMC) We Fight Any Claim have applied for a judicial review into the decision to set a deadline.

Whether they'll be successful in their application is difficult to say, not least because they're now appealing the rejection of their initial application. However, one thing that's more confident is that the FCA's bid for "clarity" has ironically had the opposite effect, at least for the time being.

Not only has it resulted in an application for judicial review, but as highlighted above it has caused banks to revise their likely PPI compensation bills ever upwards.

Indeed, Lloyds now expect to receive 9,000 PPI claims per week in the run up to the August 2019 deadline, and if the CMCs get as busy as some think they will, then even this figure could rise.

Of course, one thing any customer who has been affected by PPI mis-selling should always remember is that, contrary to what an uninvited call or text might suggest, they don't actually need a CMC or anyone else to handle their claims for them.