The Financial Conduct Authority (FCA) has published its further consultation paper on the future of payment protection insurance (PPI) complaints. CP 16/20 adds further detail to the regulator's plans to bring the ongoing issues raised by the historic sales of PPI to an orderly close, with a final date for making new complaints now estimated for June 2019.
We have been engaged in conversations with clients and industry experts and based on these discussions, we have set out below some of the initial considerations for businesses looking to plan for what is expected to be the final three years of PPI complaints operations.
While the FCA plans to keep to a two-year deadline for the bringing of new complaints, the two-year period is now planned to start in June 2017 rather than in 2016. The rules and guidance, however, are scheduled to be finalised by the end of this year. The FCA also intends to launch a campaign designed to raise customer awareness commencing June 2017.
Aligning business operations to prepare for this timescale and ensuring customers are aware of the 2019 deadline will require an ongoing review of current caseloads and close management of new complaints. It is likely that businesses will face a fresh influx of complaints ahead of the deadline. Businesses are likely to see increased complaints activity over the next three years as a result, and careful planning for the impact of this will be needed. The aim will be to handle all complaints in a timely manner within the 8-week rule period to avoid long backlogs by the time the deadline passes. We expect continued focus on 8-week positions throughout the period as any complaints outstanding after August 2019 are likely to attract negative comment from customers and the regulator.
Robust preparation will factor in an additional review period following the conclusion of the time bar in June 2019. We anticipate businesses receiving a number of complaints based on "exceptional circumstances" beyond this time and complainants progressing their claim to the Financial Ombudsman Service should be considered.
"Unfair" commission – the impact of Plevin
In its previous consultation paper, the FCA proposed a new "two step" process for the resolution of complaints which raise complaints based on an "unfair relationship" caused by the non-disclosure of agent commission for the sale of PPI, in addition to a mis-sale based complaint. This is based on the Supreme Court judgement in Plevin v Paragon Personal Finance. The FCA is now consulting on further guidance for how businesses should treat complainants asking for the refund of "excess" commission payments. The FCA has indicated that a level of 50% is likely to be used as the "tipping point" for unfairness.
With previously unsuccessful complainants permitted to raise a new complaint based on Plevin, renewed complaint activity is likely to take place as a result of the ruling. We understand that businesses are already placing these complaints on hold pending final publication of the new rules, and actively managing complaints as they arrive to ensure they have a full overview of their PPI complaint portfolio.
The FCA has also included additional information on its proposed guidance for calculation of redress, assisting businesses currently developing their calculator solutions. Alongside the new rules and guidance due later this year, the FCA has signalled an intention to publish more worked examples of PPI redress for Plevin complaints in different scenarios to assist businesses and complainants.
Businesses are considering how to operationalise this guidance as well as preparing access to their historic commission records for the purpose of handling Plevin complaints.
Claims management companies and regulatory change
The consultation paper makes clear that the FCA expects claims management companies (CMCs) to ensure customers are aware of their rights to make fresh complaints, and to seek updated authorisations from their customers to pursue any new issues. While the FCA cannot require compliance with its expectations before it takes over from the Ministry of Justice as the regulator of CMCs, this is an early sign of some of the FCA's intentions. We expect further updates on the FCA's role in the regulation of CMCs in 2017.
It is likely that a combination of regulatory changes and an impending PPI deadline will see increased activity in the CMC marketplace. A number of businesses are adopting a proactive approach when interacting with CMCs which can help identify and tackle issues at an early stage.
Summary and next steps
With the consultation ending in October and the next update expected in early 2017, the FCA has signalled an intention to bring the story of PPI complaints to a conclusion. However, mindful of recent changes heralded by the likes of Plevin, businesses across the spectrum from large high street banks to brokers and referrers of past PPI sales will be looking to map out their complaints handling strategy which allows for flexibility, fairness and resilience over the next three years.
Businesses with a strong Customer Relationship Management (CRM) function will find themselves well-placed to manage the transition, with robust data and complaints management tools ensuring they are prepared to help customers through the changes.
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