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News

Banks face further PPI claims rush under FCA rules

The Financial Conduct Authority said on Wednesday that it would launch a month-long consultation on the rules, which will make lenders inform customers that they can make new compensation claims on mis-sold PPI, even if they had been rejected. Customers must make a claim by August 2019, the deadline for all PPI claims.

The FCA estimated that the average payout for this set of customers could be between £400 and £1,100 each for upheld claims, with an additional administration cost of nearly £4m for banks.

The regulator’s rules aim to clarify uncertainty that has persisted since the Supreme Court handed down a PPI ruling in 2015 known as Plevin. The court said that customers deserved compensation if they had not been told that a substantial part of their premiums went towards commission paid to the banks that sold the policy.

But now the FCA argues that lenders must assess all disclosures since 2007.

The result will probably add to banks’ bills for PPI, which has become the costliest mis-selling scandal for UK lenders. More than £32.6bn has been paid out, according to the FCA’s most recent statistics. The average payout has been £2,750.

“The final guidance resolves an area of uncertainty and will ensure fair and consistent outcomes for regular premium PPI complaints,” said Jonathan Davidson, the FCA’s executive director of retail supervision.

“The proposed mailings will help certain consumers who have previously complained about regular premium PPI but been rejected to engage with our campaign and consider whether they want to make a new complaint about undisclosed commission before the deadline.”

UK Finance, the banks’ trade body, said that it had liaised closely with the FCA “to ensure the right balance is struck between ensuring that the process is not overly bureaucratic whilst collecting all the details required to consider a complaint”.

But Wednesday’s FCA paper does not address a recent court ruling that could leave the door open for even larger PPI payouts, with some estimates topping £18bn in additional compensation.

In July, a court ruled that a couple who were mis-sold PPI were entitled to be compensated all of the 76 per cent commission they unwittingly paid.

Following the Plevin judgment, the FCA told banks that commissions comprising more than 50 per cent of customers’ premiums were unfair, and that anything over this point should be paid back. But following July’s ruling, lawyers argued that customers could have all the commission paid back, not just that above 50 per cent.

Article taken from – The Financial Times

Posted by M White on 09 Nov 2018

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