How will £100bn be repaid in time?
Within the financial service world, the Financial Conduct Authority [FCA] Payment Protection Insurance [PPI] claims deadline is big news. It’s not surprising; the decision was subject to a number of consultations and legal challenges. Whatever the rights and wrongs of a PPI claims deadline where many consumers do not even know they have been paying for it, consumers now have a limited time to claim. Like it or not, there is a deadline. The fairness of that deadline will be judged on two simple criteria:
- How many consumers know about the deadline?
- How much of the amount owed to consumers is actually repaid?
As the FCA campaign has now been running for a number of weeks; what progress on these two measures is being made?
Four in Five cannot identify the FCA deadline!
The PFCA engaged Populus (a leading independent consumer research agency) to find out if the FCA campaign is getting its message across. On behalf of the PFCA, Populus carried out random interviews across the United Kingdom within in a sample of over 2,000 adults. Nearly half were unaware of a deadline and four in five of GB adults cannot identify the deadline set by the FCA.
Some think deadline linked to Brexit?
The conclusion is, sadly, the FCA message is not getting through to those it should be influencing. Fact: Worse, some consumers who were aware of a deadline thought it was linked to next year’s local elections and others thought it was linked to Brexit!
Do consumers need help to claim?
Part of the FCA and Financial Ombudsman Service [FOS] mantra is you don’t need third party assistance to make a PPI claim. The issue is, do consumers agree with those organisations? Only 14% of GB adults were very confident they could investigate and reclaim money themselves. The PFCA, via Populus, asked the same question in March 2016. At that time 16% answered they were very confident. Only half of consumers are confident they can investigate and reclaim PPI on their own. Clearly, there is a mis-match between the mantra and reality.
Final mis-sold PPI bill likely to exceed £100bn!
It is not disputed that if the FCA campaign reaches the right people and motivates them into doing something to investigate and reclaim mis-sold PPI the final bill will exceed £100bn (including statutory and account interest) of course, the amount paid back to consumers does not include the administration cost to banks balance sheets correcting their inappropriate historic insurance sales. Analysis has been unable to unravel those costs but on their own they will add many millions of to the total cost. The FCA has not updated the monthly PPI refund and compensation analysis page on its website site since July 2017. Current figures show, a total of £27.9bn had been repaid. These amounts, coupled with a failing advertising campaign, show much more has to be done by regulators and product providers to make significant process.
As it stands, those who called for a pro-active redress campaign (similar to many other redress schemes ordered by the FCA) were right.
FCA statistics give a misleading illustration of progress
When considering the effectiveness of the FCA campaign it is important not to be lulled into thinking progress is being made when it isn’t.
What do I mean?: Product providers saw an increase in PPI claims in the run up to and around the time of the deadline announcement. Claims numbers have now fallen back. This appears to show that the media and consumer group attention in respect of the deadline challenges had more effect than the ongoing adverts themselves!