FCA sets later deadline for bank PPI claims
The UK financial watchdog has pushed back the final deadline for bank customers to make a new complaint about payment protection insurance (PPI) misselling to 29 August 2019, with banks having so far paid out around £26bn of compensation.
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Two years ago, the Financial Conduct Authority had planned to set a 2018 deadline for payment protection insurance, but faced complaints from consumer bodies that this was “ill-judged”.
But on Thursday, confirming it was drawing a line under the financial industry’s costliest mis-selling scandal, the City regulator said it will launch a two-year consumer communications campaign beginning in August to encourage consumers to decide whether to act about PPI before the 2019 deadline.
Consumers may be able to raise claims for refunds on commission paid on PPI even if they have had their cases dismissed, the FCA said, under the so-called ‘Plevin rule’ that takes precedent from a Supreme Court judgment case.
This could lead to banks setting even more money for potential compensation.
“Putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off," said the FCA chief executive Andrew Bailey, adding that two years was a reasonable time for consumers to decide whether they wish to make a complaint.
“We have carefully considered the feedback we received and we still believe that introducing a deadline for PPI complaints and a communications campaign warning of the deadline will benefit consumers.”
The new deadline could have both bullish and bearish connotations for UK banks, said analysts, with the largest scandal of its kind in UK history running longer than the industry had been hoped.
"Lloyds in particular, as the holder of the largest mortgage book in the UK, could see a significant increase in the amount of claimants coming forward," said analyst Henry Croft at Accendo Markets.
"The bank was assumed to have dealt with the majority of its claims already at a cost of £17bn - roughly half of the overall hit to the industry, as Q4 results saw no additional provisions to deal with claims being put aside for the first time in years.
But he said the final decision by the FCA marks a line in the sand for UK retail banks, after results have continually been blighted by the constant need for increasing provisions to cover the cost of misselling.
"With the sector having already paid out an estimated £26bn since 2011, the idea of an absolute end point for the saga could see a collective sigh of relief from executives – the nightmare finally coming to an end.
"The only thing left to be seen is whether we see a significant amount of PPI claimants coming out of the woodwork, having put off investing the time and effort into making a claim thus far, and whether the commission payments unknowingly made by consumers happened on a similar scale to the mis-selling of PPI in the first place.”