The Financial Conduct Authority [FCA] has issued the results of a thematic review into banks fair treatment of customers when calculating the redress due in respect of Payment Protection Insurance [PPI]. As a direct result of the review, banks, credit card providers and personal loan companies [product providers] are being forced to review more than 2.5 million historic complaints. These are complaints which were either unfairly rejected or the redress was mis-calculated and too little redress was paid. Customers expect to be treated fairly in all their dealings with their chosen product provider, but rightly expect things to be put right competently and quickly when things go wrong. After all one of the foundations of financial service regulation is, “A firm must pay due regard to the interests of its customers and treat them fairly” [FCA Principles for Business 6]. The fallout from the current thematic review (and previous PPI mis-selling history) is, therefore, especially worrying.
A history of customer abuse
Many industry commentators and readers of the FCA review were not surprised to see that the PPI debacle continues to hit the headlines. The original mis-selling and the way product providers have failed to put things right that went wrong is nothing short of scandalous. The history of PPI continues to embarrass any professional, customer focused banker. As the FCA confirms, “Too many firms too often failed to give a balanced presentation of the product’s pros and cons or ensure that a policy was suitable for the consumer’s needs.” As a result, PPI sales grew rapidly with around 45m policies being sold which generated around £44bn in premiums. The FCA’s predecessor (the Financial Services Authority [FSA]) was concerned about the sale of PPI from the time it took on the responsibility for general insurance sales in January 2005. In the same year the FSA carried out a thematic review of PPI selling practices and found significant shortcomings in many firms.
Self-interest leads to an unsuccessful challenge
During 2006 to 2008 the FSA issued three further updates, detailing disappointing findings from its reviews. Enforcement action followed against 28 firms and 7 individuals, with each final notice detailing the firms’ sales failings and imposing fines. As early as 2010 the FSA’s focus shifted from the original selling practices to ensuring that firms gave fair assessment, and where appropriate fair redress, to consumers who complained they had been mis-sold PPI. In August 2010, the FSA introduced additional measures to significantly improve firms’ handling of PPI complaints. Self-interest and a lack of customer focus led the banking industry to unsuccessfully challenge these measures in the High Court. Against this backdrop, the new findings and the forced review of historic complaints (that should have been settled in a fair manner) it is not surprising that some commentators are now suggesting the banks are incapable of ‘getting the message’ that regulators demand that customers are treated fairly in all their dealings with product providers, even when submitting complaints.
Bank redress calculations continue to be questioned!