FCA provides update on PPI

The Financial Conduct Authority (FCA) has today confirmed that it believes that, overall, the package of proposals on payment protection insurance (PPI) complaints laid out in its November 2015 consultation should be taken forward.

This package includes imposing a deadline for making new PPI complaints[1] and launching a consumer communications campaign to raise awareness of the PPI issue and the deadline.  The FCA also intends making rules and guidance on handling PPI complaints in light of the Supreme Court judgment in Plevin v Paragon Personal Finance Ltd (Plevin).

Before making a final decision on some or all of the proposals the FCA is consulting on changes to the proposed rules and guidance concerning the handling of PPI complaints in light of Plevin. These proposed changes are in response to feedback received on the November 2015 consultation and relate in particular to three key aspects of the rules and guidance:  

• to include profit share in our approach to the assessment of fairness and redress;
• to allow previous rebates to a consumer when they cancelled their PPI policy to be partly reflected in (and so reduce) any redress due;
• to clarify how firms should assess fairness and redress where commission or profit share rates vary during the life of the PPI policy.

The FCA will consider the further feedback and the consultation will close on 11 October 2016.

Andrew Bailey, chief executive of the FCA said:

“Putting a deadline on PPI complaints will bring the issue to an orderly conclusion in a way that protects both consumers and market integrity.

“We have listened to all the feedback we have received and believe that the steps we are taking are the right ones. We will ensure that our communications campaign will engage with all those who could be affected, particularly vulnerable consumers.”

If the FCA decides, following assessment of further feedback, to proceed with the proposals, it is anticipated that:

• the rules and guidance concerning the deadline, the consumer communications campaign fee, and PPI complaints and Plevin, would all be made on the same date by the end of December 2016;
• the Plevin rules and guidance and the fee rule would come into force around 3 months later, by the end of March 2017. This is to allow firms time to prepare for and implement the provisions on Plevin;
• the rule setting the PPI complaints deadline would come into force around 6 months after it was made, by the end of June 2017, with the consumer communications campaign starting at the same time. This timing is to allow the FCA to begin the necessary campaign production after the deadline rule is made;
• the deadline would then fall two years after the deadline rule came into force, by the end of June 2019.

The timings above are subject to the feedback received to the further consultation.

What should consumers do?

Consumers who are unhappy about PPI should continue to complain to the firms concerned[1] and to the Financial Ombudsman Service if they are not satisfied with the response.

Notes for editors

1. Profit share refers to arrangements to receive back part of the PPI premium that had initially gone to the insurer, for example, to cover potential claims, but which remained unspent, for example, because actual claims did not exceed certain levels.
2. CP16/20, 2 August 2016 Rules and guidance on payment protection insurance complaints: feedback on CP15/39 and further consultation[2].
3. CP15/39, 26 November 2015: Rules and guidance on payment protection insurance complaints[3].
4. FCA statement, 2 October 2015: The Financial Conduct Authority’s Statement on payment protection insurance (PPI)[4].
5. FCA statement, 27 May 2015: Statement on Plevin v Paragon Personal Finance Ltd[5].
6. FCA statement, 30 January 2015: The Financial Conduct Authority to gather evidence on how the PPI complaints process is working[6].
7. Supreme Court Judgment: Plevin v Paragon Personal Finance Ltd, November 2014[7]. The court ruled that a failure by a lender to disclose to a borrower at point of sale the large commissions payable out of the PPI premium made the relationship between the lender and the borrower unfair under section 140A of the Consumer Credit Act 1974.
8. Monthly PPI refunds and compensation statistics.[8]
9. The proposed deadline would not extend time for those consumers for whom the time limits under our existing rules have already begun to run or passed (for example, those consumers who have received letters from firms in the last few years which specified they had three years from receipt in which to complain).
10. PPI was sold to borrowers alongside credit products. It was meant to help repay some or all of their borrowing if they lost their income for a period (if, for example, they had an accident, became unemployed or sick, or died). The most commonly sold types of PPI were single premium policies on unsecured loans (around 48% of all PPI policies sold), credit card PPI (around 36%), and regular premium policies on loans or mortgages (around 15%).
11. Find out how to claim for mis-sold PPI[2].

Information on the FCA

1. Find out more information about the FCA.
2. On 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
3. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.