Is a final PPI storm coming? – Part 2

Last year, in our article Is a final PPI storm coming?, we considered whether firms could anticipate a final bluster of PPI related complaints. Now that a time-bar has been announced, and guidance on Plevin has been published, that potential storm is now closer to being a reality.

One of the biggest regulatory announcements last week was the FCA confirming that PPI complaints are finally to become subject to a time-bar. Consumers who have been affected by the mis-selling of payment protection insurance have until August 29th 2019 to submit a complaint. The time-bar will not affect complaints relating to PPI products sold after 29th August 2017.

In order to raise awareness and encourage consumers to enforce their right to redress, the FCA will be undertaking a high-profile communication campaign from August of this year. Andrew Bailey, Chief Executive of the FCA confirmed the rationale for introducing the time-bar by saying, “a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off… introducing a deadline for PPI complaints and a communications campaign warning of the deadline will benefit consumers”.

Research carried out by ComRes in 2015 suggested that the most likely factor in motivating a consumer to complain would be an official government communication campaign. Given that up to 50% of potential claims had not been instigated, there is a prospective wealth of new complainants who have yet to make a claims.

Alongside the likely influx of new complaints firms should also consider the additional requirement to contact any previously rejected complainants who may now be eligible to redress as a result of Plevin, and explain to them fully the new basis for making a complaint.

Coinciding with the announcement of a time-bar is the publication of FCA guidance relating to the ruling in Plevin v Paragon Personal Finance Ltd. The FCA has confirmed much of what it had previously proposed in consultation papers over the last year, notably the ‘50% tipping point’ for commission earned on the selling of PPI. The guidance suggests that where the amount of commission on a relevant product reaches or exceeds the 50 percent threshold, the firm should presume, that failure to disclose the amount of commission created an unfair relationship and redress will be owed. Firms should also make sure to include the profit share in the subsequent redress calculation, with redress being calculated as the value of the excess commission of the tipping point of fifty percent.

Calculating redress is often a largely automated process, however firms relying too much on automation have been incorrectly over and under paying customer redress by as much as 25%. Firms should ensure they are confident in their processes to ensure that Plevin related calculations are right first time. Not only to ensure that they do not pay out too much but also to ensure that they do not risk having to re-review under payed cases in the future.

The Supreme Court decision in Plevin also appears to have had a direct impact on consumers’ intention to complain. Consumer research has suggested that half of those who previously were either “unsure whether to complain” or “not intending to complain” said that they would now complain in light of the new ruling.

Combined time-bar and the Plevin rules and guidance could have a significant impact on firms’ ability to respond to complaints in line with regulatory requirements. Firms should now be prepared, having assessed their exposure and planned for the likely volumes to come.

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