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FCA and PPI: Is enough being done to make amends?

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FCA gathering evidence on PPI complaints process

The Financial Conduct Authority in the UK says it will gather evidence on how the PPI complaints process is working.

The FCA decision has significant implications for all bank customers who were talked into entering payment protection schemes, including numerous former business professionals, students and other individuals and families from the Middle East and North Africa region (part of The Middle East in Europe readership), many of whom may have  left Britain, gone home and therefore are out of the loop on the UK’s PPI saga.

The FCA says it will use the evidence to assess “whether the current approach is continuing to meet its objectives of securing appropriate protection for consumers and enhancing the integrity of the UK’s financial system.” The FCA will then consider whether further interventions may be appropriate–which could include a consumer communication campaign; a possible time limit on complaints; or other rule changes or guidance–or whether the continuation of the PPI scheme in its current form best meets its objectives.

The FCA expects this work to commence shortly and to give its view on the evidence collected in the summer.

While this work continues, the FCA expects firms to “continue to deal with PPI complaints in accordance with our requirements.”

Consumers who believe they were missold PPI should continue to complain to the firm that sold it to them and to the Financial Ombudsman Service if they are not satisfied with the firm’s response. Making such complaints is free to consumers and there is no need to use a claims management company, the FCA points out.

PPI was sold to borrowers alongside credit products. It was meant to help repay some or all of their borrowing if they lost their income for a period (if, for example, they had an accident, became unemployed or sick, or died). The most commonly sold types of PPI were single premium policies on unsecured loans (around 48% of all PPI policies sold), credit card PPI (around 36%), and regular premium policies on loans or mortgages (around 15%).

Since January 2011, firms have handled over 14 million PPI consumer complaints about the sale of PPI, upholding over 70 percent and paying GBP 17.3 billion compensation. The FCA says its intensive work with firms has led those firms to “improve their assessments of PPI complaints.” The FCA is a successor in the UK to the former Financial Services Authority. On 1 April 2013 FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA). On 1 April 2014, the FCA took over responsibility for consumer credit and the regulation of 50,000 consumer credit firms, including logbook lenders, payday lenders and debt management firms.

Although FCA says financial firms are proactively sending over 5 million letters to customers they have identified as being at high risk of having suffered a past missale but who have not complained, aggrieved clients remain skeptical. Documents seen by The Middle East in Europe show customers were frustrated despite numerous approaches to banks, in particular cases involving PPI claims related to Bank of Scotland and other elements of Lloyds Banking Group, National Westminster Bank, the former Egg plc and Marks and Spencer’s Financial Services.

Customers of financial products and services interviewed by The Middle East in Europe have said the banks continue to confuse them with obfuscatory correspondence, often never signed and seldom accompanied by a telephone contact. Additionally, these interviewees have told MEE, banks that have agreed to and in some cases disbursed compensation have deployed complicated procedures when communicating statistics to existing or former customers about PPI payouts.

Furthermore, the interviewees told MEE, the compensation procedure has revealed a major flaw in that there’s no system in place whereby statistics provided by banks for payouts can be independently assessed and verified.

The customers’ unease is partly exacerbated by shocking banking malpractices reminiscent of poorly governed developing countries, including the use of fake law firms, false and multiple identities of non-existent individuals signing letters to customers, miscalculating of charges and other irregularities only partly revealed in recent media reports. Overseas residents in the UK with poor language skills are seen to be particularly vulnerable to these malpractices.

Additional FCA guidance and information

Author: Editor

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