PPI News

FCA to Consult about PPI Compensation Time Limit

October 2, 2015

The Financial Conduct Authority (FCA) has announced that it is to “consult” various parties about the introduction of a PPI compensation time limit.

The FCA issued a statement this morning containing proposals to introduce a PPI compensation time limit and proposals on how claims for PPI compensation should be handled when the customer is claiming that the amount of commission from the PPI sale was not disclosed.

The proposals are intended to be the starting ground for consultations that will continue for the rest of the year, and are significantly favourable to banks and credit card companies who mis-sold payment protection insurance to millions of customers.

The Proposed PPI Compensation Time Limit

Several times in the past, banks have approached the FCA requesting a PPI compensation time limit to restrict the amount of compensation they have to pay. On these previous occasions, the FCA has rejected calls for a PPI compensation time limit and said that, if one was to be introduced, credit providers would have to fund a significant marketing campaign to inform customers of their rights.

Now, using the excuse that the PPI complaints procedure is “open-ended”, the FCA is proposing to introduce a two-year PPI compensation time limit in April 2016. This would mean that customers who have been mis-sold PPI will have to make their claim before April 2018 or forfeit their right to compensation. Consumer protection groups are yet to comment on this proposal.

Compensation for Undisclosed PPI Commission

In the FCA´s statement, the issue of Plevin –v- Paragon Personal Finance was also raised. In this Supreme Court case, Susan Plevin successfully claimed that PPI was mis-sold to her because of the high level of commission that was deducted from her single premium (72%). Judges at the Supreme Court agreed that this created an unfair relationship between lender and borrower under §140A of the Credit Consumer Act.

The result of the court case created an issue for the FCA inasmuch as it meant customers could claim PPI compensation on the grounds that they were not informed of the percentage of their premium that was being deducted for commission. As Susan Plevin claimed, she would not have purchased PPI (and paid interest on the premium for ten years) if she was aware of how much commission was being deducted.

FCA Proposals for Undisclosed PPI Commission Redress

To address the possibility of a deluge of PPI compensation claims for undisclosed PPI commission, the FCA has proposed that only claims in which the undisclosed commission was greater than 50 percent should be considered for redress. The FCA suggests that the difference between the undisclosed commission and 50 percent should be refunded to the customer, plus historic interest, plus 8 percent statutory interest.

According to the Competition Commission´s Report of 2009, the average commission on single premium PPI sales between 2002 and 2006 was approximately 67 percent. This would make it likely that most customers who purchased a single premium payment protection insurance policy within this period would be entitled to claim compensation for undisclosed PPI commission. No figures have yet been released on commissions deducted after 2006, or how the regress scheme applies to monthly paid PPI premiums.

The Question of Comparative Redress Remains Unanswered

One of the biggest complaints about how credit providers have handled PPI compensation claims for single premium policies is “comparative redress”. Comparative redress is the practise of refunding a customer the difference between what they paid for a single premium PPI policy and what they would have paid for a monthly premium equivalent.

The FCA said in its statement that, if redress has been already been paid to a customer, the credit provider does not have to act on a further claim for compensation for undisclosed PPI commission. This implies that if a customer has already received “comparative redress”, it excludes them from claiming compensation for the non-disclosure of PPI commission – irrespective of how high the commission rate was.

Banks Not Required to Retrospectively Review PPI Sales

The final (proposed) slap in the face for the consumer is that the FCA is not going to ask banks and credit card companies to retrospectively review PPI sales that fall within the scope of §140A of the Credit Consumer Act (the non-disclosure of commission creating an unfair relationship) or review previously rejected PPI claims for compensation.

Effectively the FCA is proposing that each individual customer find out for themselves if they are entitled to make a claim for PPI compensation within the proposed PPI compensation time limit. We believe consumer protection groups might have plenty to say about this proposal!

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FCA Delays Announcement on PPI Undisclosed Commission Compensation

September 28, 2015

The Financial Conduct Authority has delayed an announcement on PPI undisclosed commission compensation that could cost banks a further £30 billion.

Since the Financial Conduct Authority (FCA) first started keeping records in January 2011, banks and other credit providers have paid out more than £20 billion in PPI compensation to credit consumers who were mis-sold payment protection insurance.

However, that figure could be set to more than double if the city watchdog agrees with the Supreme Court decision in Plevin v Paragon Personal Finance that the failure to disclose the distribution of PPI commission was in breach of the Credit Consumer Act.

In Plevin v Paragon Personal Finance, Susan Plevin successfully argued that she would not have agreed to a single premium PPI policy costing £5,780 had she known that £4,060 of the charge was being kept as commission by the broker and loan company that sold her the insurance product.

The implication of the Supreme Court verdict is that anybody who was sold a PPI policy without being given a breakdown of the commission being deducted from the premium will be able to claim PPI undisclosed commission compensation.

This applies to periodic and monthly-paid PPI policies as well as single premium PPI policies; and, as bank employees were paid commissions on their sale of payment protection insurance, will apply to many millions of policies which were otherwise sold in compliance with FCA guidelines.

Insurance experts believe that, should the FCA accept the Supreme Court verdict, there will be a new wave of PPI claims that could cost banks and other credit providers more than £30 billion – mostly due to the interest charged on single premium insurance policies over the lifetime of a loan.

The key question that needs to be answered is whether or not the failure to disclose commission payments on PPI policies was in breach of the Credit Consumer Act. If so, the volume of PPI undisclosed commission compensation payments could more than double those overseen by the FCA in the past four and a half years.

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CAB Report Shows Enquiries about PPI Compensation Still High

September 21, 2015

The Citizens Advice Bureau has released in latest quarterly “Trends” report showing that enquiries about PPI compensation are still running at high levels.

The Citizens Advice Bureau produces a quarterly “Advice Trends” report that lists the volume of enquiries it receives over many different topics that results in advice being provided to members of the public. The report is used as a barometer by many government departments, regional agencies and organisations to identify issues which concern the public and where steps need to be taken to address those issues.

One of the most significant outcomes from the data compiled by the Citizens Advice Bureau was the launching of a “super complaint” to the Office of Fair Trading in September 2005. The super complaint led to new regulations for the selling of payment protection being introduced, and the recovery of compensation for those who had been mis-sold it.

However, ten years after the initial steps were taken to stop the mis-selling of payment protection insurance, the Citizens Advice Bureau is still receiving a significant number of enquiries about PPI compensation. Its latest “Advice Trends” report shows that in the first quarter of 2015/16 (April to June 2015) the charity received 1,180 enquiries about PPI compensation.

Although considerably less than the corresponding periods over the past three years (enquiries about PPI compensation topped 15,000 in the whole of 2013), the volume of enquiries shows that there are still plenty of customers who are unaware about their rights to claim PPI compensation. Gillian Guy – the Chief Executive of Citizens Advice – commented:

“The PPI scandal reached pandemic proportions. It is a real lesson for banks and the wider industry that they cannot get away with mistreating their customers. After dragging its feet when we first raised concern about PPI, the industry is paying the price for not taking action sooner. While regulation and banks´ approach to customer service has improved in recent years, the seismic failings around PPI should serve as a constant reminder that firms cannot get away with ripping off customers”.

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Monthly PPI Refund Payments Continue to Outstrip 2014

September 14, 2015

The amount of monthly PPI refund payments paid to customers continues to stay ahead of 2014 levels according to the latest data released by the FCA.

Each month, the Financial Conduct Authority (FCA) releases data relating to the value of PPI refund payments paid to bank and credit card customer who were mis-sold payment protection insurance. The city watchdog has just published its data for July 2015 which although showing a slight decrease on July 2014, keeps the total value of PPI refund payments in 2015 ahead of the comparative period in 2014.

In July 2015, £327.9 million was paid out by banks and credit card companies to customers who were mis-sold payment protection insurance, bringing the total value of PPI refund payments for the year to date to £2.719 billion. By comparison, the total for 2014 up until the end of July was £2.659 billion. However, little of the increase can be attributed to banks and credit cards adopting fairer banking practices.

Last month the Financial Ombudsman Service published its complaints data for the first quarter of 2015/16 (April 2015 – June 2015) and the first half of the calendar year (January 2015 – June 2015). Both revealed quite disturbing figures about the level of banking practices being adopted by banks and credits card companies, with overall uphold rates for PPI complaints running at 74% and 76% respectively.

The worst offender among the major financial institutions was again the Lloyds Banking Group. More than 40,000 new PPI-related complaints were accepted by the Ombudsman from customers of the Lloyds Banking Group (which includes Lloyds PLC, Bank of Scotland, Halifax, and the Cheltenham & Gloucester Building Society), with 93% of PPI-related complaints against Lloyds Bank PLC upheld in the customer´s favour.

The Lloyds Banking Group recently increased its provision to pay PPI refund payments by £1.4 billion, and the group´s CEO – Antonio Horta-Osorio – warned that another £1 billion could be added to the provision during 2015, with another £2 billion allocated in 2016. Mr Horta-Osorio is possibly considering a soon-to-be-delivered statement from the FCA regarding the implications of the recent Plevin –v- Paragon Personal Finance court case, in which the claimant was successful in claiming that PPI was mis-sold to her because the value of the sale commission was not made clear.

If the FCA confirms all customers are entitled to PPI refund payments for the sales person´s lack of transparency, the value of monthly PPI refund payments could outstrip the record levels seen in 2012.

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Barclays Rated as Worst for Customer Service for Third Year Running

August 25, 2015

Barclays has been rated as the worst financial institution for customer service for the third year running in a survey conducted by MoneySavingExpert.com.

It will come as little surprise to customers of Barclays Bank – particularly those who were mis-sold PPI – that their bank has been again voted the worst for customer service. What may raise a few eyebrows is that the service provided by the bank is considered to have deteriorated over the past year – with 20 percent of the survey´s respondents describing the customer service they received as “poor”.

Customers who have tried to recover PPI compensation from Barclays will be in no doubt that their bank deserves the wooden spoon for customer service. More than twenty thousand complaints about products and services offered by Barclays Bank have been received by the Financial Ombudsman Service so far this year – more than twelve thousand of them relating to unresolved claims for PPI.

The Financial Ombudsman Service has upheld 82 percent of PPI-related complaints against Barclays in favour of the customer, and a significant number of complaints made about the bank´s packaged bank accounts, credit cards, mortgages, investments and other insurance services. In fact, the only department of the bank´s services which is not heavily criticised is its pensions department.

The MoneySavingExpert.com survey asked customers of thirteen current account providers to give their opinions of the service they received from their banks. First Direct topped the list with a 92 percent approval rating, followed by Santander, Nationwide and the Co-Op Bank. Lloyds Bank PLC came in ninth place in the list, when many of its customers would have expected the bank to have occupied a lower position, but only the Royal Bank of Scotland came close to challenging Barclays for bottom spot.

Guy Anker, of MoneySavingExpert.com, said: “Our index shows once again the strength of First Direct’s service and the continued improvement from Santander, which used to languish at the bottom. This should be seen as a stark warning that they risk losing customers if they don’t raise their game. Anyone unhappy with the service they’re getting from their bank needs to ditch it, especially as some of the best deals are from banks with good service.”

Responding to the results of the survey, a spokesperson from Barclays said: “Our goal is not just to meet our customers’ expectations but to exceed them and to remove any cause for complaint. For this reason, we are continually working to simplify our products and services, create greater transparency and free up our colleagues to help customers.”

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Uphold Rate for PPI Complaints to Ombudsman Rises to 76%

August 24, 2015

The half-yearly complaints data report from the Financial Ombudsman Service has revealed that the uphold rate for PPI complaints has risen to 76%.

The Financial Ombudsman Service is an independent arbitrator when disputes arise between financial institutions and their customers. Every six months, the Ombudsman publishes a table which reveals how many complaints it has received about payment protection insurance and other financial products.

As has been widely forecast, the number of new complaints about PPI has declined considerably. However, against most predictions, the uphold rate for PPI complaints – the percentage at which complaints are found in the customer´s favour – has increased substantially from an average of 60% in 2014 to 76% in the first half of 2015.

The significance of the rise is that financial institutions have for a long time been accusing claims management companies of submitting speculative claims for PPI compensation. It was expected – according to the credit providers´ allegations – that the uphold rate for PPI claims would fall closer to 50%. However, quite the opposite has occurred.

One of the reasons for such a substantial rise in the uphold rate for PPI complaints appears to be that many customers of Clydesdale Bank have not waited for the company to complete its review of PPI claims – ordered by the Financial Conduct Authority last April – before contacting the Ombudsman with a complaint. The uphold rate for Clydesdale Bank PPI claims was 85%.

However, the high uphold rate for PPI complaints against the Clydesdale Banks was yet again dwarfed by units of the Lloyds Banking Group. The Ombudsman found in the customer´s favour in 93% of PPI complaints against Lloyds Bank PLC, in 86% of PPI complaints against Black Horse Limited and in 66% of PPI complaints against the Bank of Scotland – who, for the first time ever, became the leading source of new PPI complaints with 15,002 new cases accepted by the Ombudsman compared to 13,319 new PPI cases against Lloyds Bank PLC and 12,111 new PPI cases against Barclays Bank.

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Fund to Pay Lloyds PPI Refunds Increases by Another £1.4 Billion

August 4, 2015

The fund to pay Lloyds PPI refunds increased by £1.4 billion in the last quarter, and it could increase even more according to the bank´s CEO Antonio Horta-Osorio.

The Lloyds Banking Group has now put aside £13.4 billion pounds to pay customers of Lloyds PPI refunds – more than half the total provision of the entire UK banking industry – and Antonio Horta-Osorio has admitted that the mis-selling scandal could cost the banking group another £1 billion pounds this year and £2 billion more in 2016.

Commenting that he was “disappointed” with the rate at which claims for Lloyds PPI refunds were declining, Mr Horta-Osorio acknowledged that the situation could get worse before it gets better. More than 1.2 million claim for Lloyds PPI refunds are being re-assessed following the FCA´s £117 million fine for the failure to investigate PPI claims against Lloyds.

The implications of the recent Plevin –v- Paragon Personal Finance court case – in which the claimant won the right to claim PPI compensation because she was not fully informed of how much commission was being paid to brokers – could result in the banking group receiving millions more claims for Lloyds PPI refunds. The specialist securities firm Cenkos has estimated that the cost of Lloyds PPI refunds for this reason alone could be as high as £10 billion.

The reason that the PPI scandal has hit the Lloyds Banking Group harder than most other financial institutions in the UK was that it sold more than 16 million PPI policies since 2000. It has now settled claims on 45 percent of these policies – such was the scale of mis-selling by the banking group – and the current increase in the fund to pay Lloyds PPI refunds assumes that there will be a significant decrease in claims volumes.

In addition to the increase in the fund to pay Lloyds PPI refunds, the banking group´s first half report revealed for the first time the cost of refunding customers for the mis-selling of packaged bank accounts. The Lloyds Banking Group set aside £175 million to account for the volume of Packaged Bank Account Claims for compensation that have been received – significantly less than its High Street rivals the Royal Bank of Scotland (£300 million) and Barclays (£200 million).

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No Word Yet on PPI Claims for the Failure to Disclose Commission

July 27, 2015

Two months after issuing a statement saying it was looking into the implications of Plevin v Paragon Personal Finance, there has been no word from the FCA about PPI claims for the failure to disclose commission.

In November 2014, Susan Plevin won a landmark court case in which the Supreme Court ruled the failure to disclose large commission payments on a single premium PPI policy made the relationship between the lender and the borrower unfair.

The Supreme Court made its decision in Plevin v Paragon Personal Finance after hearing that Susan was charged £5,780 for PPI on a personal loan of £34,000, and that commission payments of £1,780 and £2,280 were paid to the broker and Paragon Personal Finance respectively.

The implications of the Supreme Court verdict are that any credit customer who was not advised how much of the premium was being paid to brokers should be entitled to make PPI claims for the failure to disclose commission.

At the end of May, the Financial Conduct Authority (FCA) issued a statement saying it was “considering whether additional rules and/or guidance are required to deal with the impact of the Plevin decision”. An announcement of its views was expected weeks ago, but as yet there has been no indication of how the FCA intends to deal with a potential explosion of PPI claims for the failure to disclose commission.

Quite possibly, the delay in providing an opinion about PPI claims for the failure to disclose commission could be tied into a review of PPI claims procedures that was announced in January. The review is considering whether the current PPI claims procedures are meeting their objectives, or whether new measures should be introduced.

The new measures include a consumer awareness campaign and the possible introduction of a time limit in which to claim PPI compensation. Seven months after that announcement was made, we are still waiting to find out what measures – if any – the FCA will introduce that will affect the rights of consumers to claim compensation for being mis-sold PPI.

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BBC Exposes Credit Card PPI Redress “Lottery”

July 20, 2015

The BBC´s Moneybox program has exposed how consumers seeking credit card PPI redress receive different amounts depending on the issuer of their credit card.

Listeners to Radio 4´s Moneybox program heard that credit card PPI redress “is becoming a bit of a lottery” due to two different methodologies used to calculate PPI refunds when credit card consumers pay off their monthly credit card balances.

Both methodologies are supposed to return the credit card holders to the financial position that they would have been had PPI not been missold to them. However, the way in which certain credit card companies calculate credit card PPI redress mean that their customers receive a lower amount of PPI compensation than if their credit card had been issued by a High Street bank.

Explaining the difference between the two methodologies, personal finance expert Jonquil Lowe said that when refunds of PPI are calculated, a consumer´s credit card history is reconstructed. Premiums for missold PPI are removed, as are any fees and charges that have been triggered by the premiums. Any interest charged on the premiums, fees and charges is refunded and 8% is added to the total as statutory interest.

When the premiums, fees and charges are removed, the outstanding balances due to be paid by the credit card holders are lower. Consequently, when consumers have paid off their credit card balances in full, they have effectively overpaid the credit card company. In this scenario, High Street banks treat the overpayment as a temporary credit to be used against future spending and, when they calculate credit card PPI redress, they include the overpayments in their payments of PPI compensation.

However, when selected credit card companies calculate their customers´ PPI refunds, the overpayment on the account is treated as a permanent loan therefore not included in credit card PPI redress payments – this reducing the value of the refund and creating the scenario in which two credit card customers have paid the same amount in premiums and charges after being missold PPI, but the bank credit card customer receives significantly more credit card PPI redress.

The two companies specifically identified as using the latter methodology to calculate credit card PPI redress were MBNA and Capitol One. However, there could be several other credit card companies also using this method for calculating credit card PPI redress. Therefore, if you have received a refund of PPI compensation from a credit card company, and would like to ensure that it has been calculated correctly, please call our claims helpline and speak with one of our claims specialists.

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Refunds of PPI Compensation up Year-on-Year

July 15, 2015

According to the latest figures from the Financial Conduct Authority, refunds of PPI compensation have increased year-on-year by almost £100 million.

Since January 2011, the Financial Conduct Authority has maintained a register of how much PPI compensation is refunded to consumers each month. The latest addition to the register shows that in May £390.4 million was paid out by banks and other credit providers in refunds of PPI compensation.

This brings the total amount of refunds of PPI compensation paid out so far in 2015 to £1.985 billion – almost £100 million more than was paid out at the corresponding stage of 2014 (£1.886 billion) – and the total amount paid out since the Financial Conduct Authority started its register to more than £20 billion.

The year-on-year increase in refunds of PPI compensation implies that the volume of PPI complaints being made by ripped-off consumers is not declining as quickly as was forecast; although some of the increase could be attributable to the re-assessment of previously under-settled claims or disputes being resolved in favour of the consumer by the Financial Ombudsman Service.

The Ombudsman is due to release its first half year report in the near future, when it will be revealed how many unresolved PPI complaints still require investigation. In January this year, the independent arbitrator revealed that there was a backlog of 280,000 complaints to be resolved and that new complaints may take up to eighteen months to resolve because of their increasing complexity.

However, there was better news regarding the PPI complaints procedure last week, when it was revealed that the Financial Conduct Authority had approved the Ombudsman´s application for certification under the “Alternative Dispute Resolution (ADR)” directive. Once certified as an ADR, the Ombudsman will have to resolve disputes within a ninety day period.

Although the certification does not take effect until July 2017, the Financial Ombudsman Service will have had to clear it desks of all disputes lasting longer than ninety well before then and will be working hard to resolve the current backlog of complaints as quickly as possible – enabling more consumers to receive their refunds of PPI compensation in the near future.

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