By Nick Baxter
3rd December 2015
 

After much speculation, the Financial Conduct Authority [FCA] Payment Protection Insurance [PPI] deadline consultation has been issued. It is axiomatic that the FCA needs to review it practices and guidance from time to time and as the current PPI complaint handling rules have been in place for 5 years the time is right to review them. Whether the FCA is right to consult on a deadline for claims is a different matter. As a result of the consultation, the views between product providers and those who are seen as fighting for the rights of consumers appear to have become even more polarised.

Richard Lloyd is disappointed – Martin Lewis is scathing!

The product providers who have lobbied for a deadline over many years are clearly delighted that one is now being actively considered while consumer lobbying groups such as Which? and MoneySavingExpert.com are livid that the suggestion is being considered again. As Richard Lloyd, executive director of Which?, says in The Times “the deadline [consultation] was hugely disappointing” and “Instead of rewarding the banks that have dragged their heels over paying out compensation, the FCA should be requiring firms to proactively seek out customers owed money”. Martin Lewis of MoneySavingExpert.com is even more scathing. His website states, “This is not a consultation in the true sense. We know it’s a done deal that the FCA is going to put a time-bar on PPI reclaiming, so all it’s really asking for is suggestions of how it tweaks its implementation. Yet that doesn’t stop the fact that we are very disappointed 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%? To go to the Ombudsman you have to first complain to the bank, so its likely banks are still wrongly rejecting claims from over half of those who have been mis-sold.”

Such a situation is likely to cause significant consumer detriment

The fundamental issue with any time bar is one of knowledge, i.e., do consumers know they have bought or been sold the product which is the subject of the time bar. In this regard PPI is like no other product as knowledge is not as clear cut as it is may be in an accident or contractual dispute. The simple fact is that PPI was often added to product sales (such as personal loans, credit cards or bank accounts) without consumers’ knowledge. Despite the extensive media coverage over the last years there are still many consumers who do not even know they have a PPI product. So, on that basis, how can regulators expect affected consumers to identify a product purchase or identify a ‘date of knowledge’? It does not take much thinking about to realise that such a situation is likely to cause significant consumer detriment.

Billions may not be returned to consumers who deserve it!

The FCA consultation suggests that this possible detriment can be minimised by a fee, levied on 18 firms, requiring them to pay £42.2m over two years to fund a consumer communications campaign. The FCA says that “there are likely to be very few consumers who will not be aware of PPI redress possibilities by the time of the deadline”. Although that may be correct, it does not help those consumers who do not know they have a PPI product. Additionally, there is sadly, a risk that consumers will become further ‘snow-blind’ to the press coverage of the deadline and that the deadline will simply pass without any acknowledgement – resulting in billions of pounds not being returned to consumers who deserve it. There is a suggestion of a targeted mailing campaign, but this is not as clear cut as it might sound. Product providers have already fallen short of their commitment to send 5.5m targeted contact letters and with the greatest will in the world many of the ‘at risk’ customers may no longer be customers of the product provider and may have moved address which the product provider is not aware of.

‘If there is to be a time bar, how long would be appropriate?’

Before the debate as to whether there should or should not be a time bar is decided, views are also becoming polarised on the ‘if there is to be a time bar how long would be appropriate’ question. Martin Lewis says “The time limit itself is at least a longish one, although we think it should be longer” while The Guardian reports a Lloyds director as saying that Lloyds thinks any time bar should be shorter!

Whatever the outcome of the consultation I am afraid any time bar will result in further consumer detriment!