In an update on its Payment Protection Insurance (PPI) redress work, the Financial Conduct Authority (FCA) has reported that firms have improved the way they handle complaints.
In another positive move, banks, credit card providers and personal loan companies have agreed to reassess more than two and half million complaints from 2012 and 2013 which they may have either unfairly rejected or paid too little redress to.
Martin Wheatley, chief executive officer, at the FCA, said:
“Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where its due, is an important step in rebuilding trust in financial institutions. In around two and a half million complaints this was not necessarily the case so, at our request, firms will be looking at these complaints again.
“The process is now working well; in just over three years £16bn has been put back into the pocket of the consumer – that is unprecedented. Given the enormity of this exercise it is no surprise that there have been some issues along the way but our approach is delivering a good result for consumers.”
The FCA’s update report also gives a snapshot of the PPI redress programme at this moment in time; it shows:
- Firms have now handled over 13m PPI complaints (since 2007);
- £16bn has been paid out in redress (since January 2011 – when the FCA began tracking payments);
- Seven out of ten claims have been upheld in the consumer’s favour;
- The Financial Ombudsman Service (the Ombudsman) has received over 1m complaints from people unhappy with the response from their provider – equal to about a quarter of all rejected complaints; and
- 3.2m letters have already been sent to people who are likely to have been mis-sold PPI but have yet to complain, with a further 2m to be sent in the coming months.
The report also sets out key elements of the work the regulator has undertaken with firms, and some of the interventions it has made. This includes seeking written assurance from some firms that their process is fit for purpose and fair, and formal undertakings (known as attestations) from senior managers within firms to ensure any necessary changes to processes are made.
Uphold rates
In 2012 and 2013 the proportion of complaints being upheld, known as the uphold rate, fell. Upon further investigation the FCA was not satisfied that all these complainants had necessarily been treated fairly. While the FCA recognises that firms can change the way they handle complaints, it must always be done with customer fairness at heart. By late 2012 the average uphold rate had fallen to 60% (with some firms’ rates falling lower). Following FCA intervention the rates have now picked up.
This improvement is also borne out by the proportion of complaint decisions overturned by the Financial Ombudsman Service: in late 2011 88% of complaints were overturned, in late 2012 it reduced to 60%, and, in late 2013, to 56%. There is still more to be done, but the trend is heading in the right direction.
The future
If the long term falling trend in PPI complaint volumes persists, and firms continue to improve their PPI complaint handling and complete their mailings to those who are likely to have been mis-sold but not complained, the FCA hopes to be able to scale down its intensive PPI work during 2015.
The FCA itself has learnt lessons from PPI about redress exercises. Subsequent programmes have had clearer outcomes, hard deadlines and are more direct, making it easier for those affected to get the redress they are due. Examples include the redress schemes for Interest Rate Hedging Products (which has already delivered £1.2bn of redress since May 2013) and mis-sold card protection and identity theft insurance.
Notes for editors
- Redress for Payment Protection Insurance mis-sales[1] – update on progress and looking ahead.
- Latest monthly PPI redress figures[2].
- How to claim for mis-sold PPI.
- 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%).
- On the 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).
- On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms, including logbook lenders, payday lenders and debt management firms.
- Find out more information about the FCA[3].