The Financial Conduct Authority [FCA] has released a report following its thematic review of Payment Protection Insurance [PPI] complaint handling by medium-sized firms; which covers smaller high street banks, building societies, credit card providers and personal loan companies. There should be no doubt amongst regulated firms that the FCA expects those that it regulates to treat customers fairly and deliver fair outcomes to customers, including complainants. It is encouraging that the review found that some firms were handling complaints in line with FCA expectations. Worryingly, however, with all the publicity surrounding PPI claims and the way those claims are dealt with, the FCA concluded that there were serious problems with complaint handling, decisions and communications to customers at two thirds of the firms reviewed.
Rejected cases and a high level of consumer detriment
The disturbingly high level of consumer detriment is evidenced by the fact that the FCA found, in the 12 firms they were most concerned about (who account for 6% of all PPI complaints), that the FCA disagreed with six out of ten of their rejected cases and had concerns with the redress offered in over two fifths (43 per cent) of their uphold decisions. Such figures show how far some firms still have to go to comply with FCA requirements.
The review exposed the following shortcomings in certain firms:
- Overlooking the inadequate demands and needs assessment that took place at the time of sale in an advised sale.
- Overlooking the inadequate assessment in an advised sale of whether a single premium policy would meet the customer’s demands and needs.
- Paying insufficient regard to poor disclosure of the limitations and exclusions of a policy at the time of sale.
- Not identifying poor disclosure of the cost of a policy at the time of sale.
- Providing inadequate explanations of complaint decisions and redress offers.
Significant breaches result in enforcement referral
The FCA was so concerned about its findings that it felt it necessary to highlight these findings to other firms. The fact that the breaches were considered to be of such significance that one firm has already been referred to the FCA enforcement division for further investigation should focus the minds of all other firms.
Strong words from the FCA!
The FCA clearly means business as the warnings to firms within section 4 of the report show that senior managers and boards should be left in no doubt that they will be held responsible if the FCA does not see a significant improvement in good customer outcomes. The fact that the FCA may require senior management to ‘attest’ or confirm that complaints are now being handled fully in line with the FCA rules shows level of frustration within the FCA and highlights its concern regarding the way these issues have been handled so far.
What next, more fines?
The results of this thematic review show that the FCA is on top of the issues and is clear in the way it expect firms to behave. The FCA has already commenced a review of 6 larger firms who are responsible for 80% of PPI complaints. They have been warned! Sadly, I predict another damming report and more fines.
Do consumers need professional advice?
Clearly, those receiving the complaints have made matters worse for consumers and complicated the issues to a level where expert assessment of their decisions and redress offers are often required. The rhetorical question is, how do consumers manage to find their way through the maze without professional assistance? The reality is its getting more difficult. Certain financial institutions may not want to work with Claims Management Companies [CMCs], but some of their behaviours are making more and more customers seek the help of a CMC.