Putting Consumers First

Delivering Access to Justice through

Ethical and Professional Standards

PPI Claims Management, handling failings – FCA announcement

Regulators have never shirked their responsibilities in respect of holding banks to account when they fail to treat customers who complain fairly.

The Financial Conduct Authority [FCA] predecessor (the Financial Services Authority [FSA]) first showed it was serious in these matters around the time of the British Bankers Association [BBA] unsuccessful High Court challenge of the then new FSA measures designed to ensure all Payment Protection Insurance [PPI] complainants were treated fairly. At that time, the Co-op incorrectly put on hold PPI complaints that were capable of being progressed despite the fact that the FSA made it clear that firms had to continue to process complaints, where possible, during the judicial review and warned that enforcement action could be taken if that was not done. Subsequently the Co-op received a £113,300 fine for failing to handle PPI complaints fairly. In 2013, the FCA fined three Lloyds Banking Group firms a total of £4,315,000 for failings in their systems and controls that resulted in up to 140,000 customers receiving delayed PPI redress.

Largest ever PPI Fine

So many warnings have followed that surely no-one could be in any doubt – treat complaining customers unfairly at your peril. But no, clearly not everyone has got the message as evidenced by the FCA announcement that they have issued their largest ever PPI fine. This amounted to £20,678,300 (which would have been nearly £30 million had a 30% stage 1 settlement discount not been given) for serious failings in the PPI complaint handling processes at Clydesdale Bank Plc [Clydesdale] between May 2011 and July 2013.

Providing false information to the FOS

The final notice issued by the FCA in respect of Clydesdale behaviours makes for startling reading. Having worked in financial services all my employed life, I am more than a little embarrassed that a regulator has highlighted in a decision notice activities such as:

    • “a team within Clydesdale’s PPI complaint handling operation adopted a practice between May 2012 and June 2013 of providing false information to the Financial Ombudsman Service;
    • altered system print outs relating to loans and mortgages that had been repaid more than seven years prior to the date of the complaint, to make it look as if Clydesdale held no relevant loan documentation when in fact such documents were available
    • deleted all PPI information from a separate print out listing the products sold to the customer.
    • Clydesdale was not transparent with, and in some cases provided misleading communications to, customers and the ombudsman service.”

This brings us to the size of the problem (with just this one bank). The final notice states, “During the Relevant Period, Clydesdale made decisions on approximately 126,600 complaints (13,600 of which were referred to the ombudsman service). Clydesdale’s conduct meant that up to approximately 42,200 rejected complaints may have been rejected unfairly, and up to approximately 50,900 complaints that were upheld may have resulted in inadequate redress for customers.” Put simply, the consumer detriment is frightening.

Mis-sold PPI is a hidden sale?

Lessons simply have to be learnt. Mis-sold PPI is not like any other product – in most cases of financial mis-selling consumers know they have been sold the product. That is often not the case with PPI as it was simply added to credit arrangements. Normally, when buying a financial product, the customer takes part in a ‘needs and circumstances’ analysis; that is not the case with PPI where there was often no assessment of the customer circumstances or needs. Normally there is a record of suitability; again not the case with PPI as there was often no record of suitability. Clearly, consumers should be able to rely on a complaint being handled professionally and fairly, but it seems they cannot. The only logical conclusion is that there is little point in continuing to fine companies as fines do not appear to change behaviours and it is those behaviours that have to change. If product providers cannot be trusted to do the right thing for the customer, the FCA needs to review its rules to ensure outcomes that are more transparent. Secondly, there needs to be more robust ‘checks and balances’ in place to ensure compliance.

Checking the redress is correct – Change is needed

The first step on this road is to ensure consistency in the information provided to consumers when redress is offered. The quality and level of information provided by product providers when offering redress is poor at best. It is simply not possible for a consumer, or Claims Management Company [CMC], to accurately check that the redress being offered is correct. Even the Financial Ombudsman Service [FOS] cannot check the accuracy of the redress being offered. They say they “review the breakdowns provided by businesses to determine whether or not they appear to have calculated redress correctly”. That position is no longer good enough – change has to happen, as we cannot allow the highlighted behaviours to carry on.

PFCA Code of Practice

The members of the Professional Financial Claims Association wish to set professional standards for member firms...

Download the PDF
Visit the Code of Practice page

Membership Benefits & Services

The Benefits and Services of the Professional Financial Claims Association are intended to extend beyond its own membership. The Financial Claims Management sector needs a credible ‘voice’ at a time of change and increased scrutiny within the sector.