The Financial Conduct Authority is considering a time-bar on PPI complaints from spring 2018. It has cost banks an estimated £27 billion so far and they’ve been clamouring for a deadline to draw a line under the scandal.
But they may yet have face a fresh wave of new claims which could double the eventual cost of the scandal after the City Watchdog said it is reconsidering complaints handling in the light of a landmark Supreme Court ruling last year.
The regulator plans to consult by the end of the year on the introduction of a deadline after which consumers would lose their right to claim for compensation.
Such a move seems extremely likely, especially as the FCA notes that “the open-ended nature of the complaints-led approach appears to contribute to consumer inertia - it does not incentivise consumers to check whether they had or have PPI or progress complaints in a timely fashion”.
The rule looks set to be introduced in spring 2016, giving victims of the mis-selling scandal a further two years to get claims in.
But it is also likely to a lead to an increase in the number of annoying cold calls from claims handling companies desperate to squeeze out extra fees from unsuspecting victims before their lucrative business comes to an end.
If anything it’s the latter that will persuade the regulator to act as quickly as possible as it says it’s noticed “a high and growing proportion of complaints are made via claims management companies, with fee costs to the consumers who use them”.
On top of that it says that “a significant proportion of complaints made turn out not to have involved a PPI sale”, with the blame for these spurious claims laid at the door of fee-hungry claims companies.
Consumer groups are angry at people’s right to compensation being time-limited. Martin Lewis of MoneySavingExpert.com, said: "It's disappointing the FCA has chosen to put a hold on PPI reclaiming even after many warnings of the danger. How can it argue this is being done to protect consumers when the uphold rate at the Financial Ombudsman is still over 70 per cent?
"To go to the Ombudsman you have to first complain to the bank – so it’s likely banks are still wrongly rejecting claims, from over half of those who have been mis-sold.”
Which? executive director, Richard Lloyd, said: "It's been clear for years that banks should be working much harder to resolve PPI claims fairly and a time limit must not reward those that have dragged their heels over paying out compensation.
"If a timebar is introduced, the FCA must make sure all banks carry out a complete review of their PPI handling. Efforts must be redoubled to ensure that anyone mis-sold PPI is given fair, speedy compensation so that people get back what they're rightly owed."
Meanwhile banks will applaud an early ending to the scandal although the high street giants will be waiting nervously for the FCA’s ruling on the so-called Plevin judgment.
The Supreme Court ruled last November that a loans company broke consumer protection rules by failing to tell a customer a PPI policy included a big commission charge.
If the ruling is applied to commission charges on PPI and other banking products, banks could face a compensation bill of up to £33billion, research firm Autonomous warned this summer.
Total amount set aside by big 5 banks for PPI compensation
One consolation for banks is that if the FCA does allow a fresh wave of claims following the case, they would also be time-barred with the same spring 2018 deadline as existing claims.
Meanwhile consumers should delay no longer and put together their PPI mis-selling claim. "The urgent clarion call to consumers is if you’ve had a loan, credit card or mortgage in the last 10 years you should be checking now whether you had PPI on it and if so, was it mis-sold?” said Martin Lewis.
“Many people are shocked they had PPI when they didn’t think so, as one way it was mis-sold was it was added even though they said no.
"Plus if you have already made a past PPI complaint that was rejected by the bank but you did not go to the Ombudsman then you should restart your complaint now. Banks have been fined for poor complaints handing, your bank rejection does not mean you were mis-sold."
The total amount now set aside by the big five banks alone for PPI compensation is around £26.7bn. This breaks down as follows:
- Lloyds Banking Group £13.4bn
- Barclays £5.97bn
- RBS £3.81bn
- HSBC £2.63bn
- Santander £846m