This article originally appeared in Motor Finance
magazine in September 2016.
In August, the Financial Conduct Authority (FCA) published its
response and a further consultation (CP16/20) on its proposals
regarding the handling of Payment Protection Insurance (PPI)
mis-selling complaints in light of the Supreme Court decision in
Plevin v Paragon Personal Finance Ltd. Its proposals were
set out in CP15/39.
Following the feedback on its initial proposals from firms,
trade bodies and consumer organisations, the FCA has confirmed its
intention, subject to some proposed changes, to implement its
earlier proposals. The FCA believes the
proposed measures will help bring finality and certainty to PPI claims and enable
firms to take a fair and consistent approach.
The 50% tipping point for commission being deemed unfair - this
assumption can be rebutted.
The means of calculating redress, being the difference between
the actual commission paid and the fair commission of 50%. Historic
interest paid by the consumer on that sum and simple interest at 8
percent per annum will also be payable.
Its proposals for an FCA led communication
campaign over the two years preceding the deadline to raise
consumer awareness of the deadline, how to check if they have a
complaint and explain how to make a complaint. The budget for the
campaign is Ł42.2 million. The FCA concluded that to
require individual firms to send out communications to all
customers would be impractical, disproportionate and hard to
The proposed changes following the feedback, and upon which
further feedback is sought relate to three key aspects of its
Profit share sums as well as commission amounts will be
included for the purposes of assessing fairness and redress.
How fairness and redress should be assessed where commission or
profit share rates varied during the life of the PPI policy.
That sums rebated to a consumer who cancelled a single premium
PPI policy early
should be included in, and so reduce, any redress due.
proposed rules and guidance will, subject to this further
consultation, be published in December 2016 and come into force by
the end of March 2017.
The rule setting the PPI complaints deadline
will come into force 6 months after it is made, so by the end of
June 2017 with the communication campaign starting at the same
time. The deadline for submission of PPI mis-selling
complaints will expire two years later in June 2019. Consumers who
fail to complain by the deadline will lose the right to have the
complaint assessed by the firm or the Financial Ombudsman (FOS).
The FCA proposes
however that, as is currently the case, the FOS can deal with complaints
submitted after the deadline if there is exceptional circumstance
or the firm agrees to it.
It is expected that the communication campaign will see a rise
in the number of complaints submitted, including, potentially,
speculative complaints. Firms will need to consider the operational
challenges (and financial pressures) that such an increase will
impose upon them.
Further feedback and responses to CP16/20 can be submitted until
11 October 2016.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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