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PPI complaints and Plevin: FCA new rules and guidance

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29/03/2017

Walker Morris has reported previously [1] on the Financial Conduct Authority’s (FCA) proposals for the handling of Payment Protection Insurance (PPI) complaints and for dealing with the so-called ‘Plevin problem’ (that is, the uncertainty following the Supreme Court’s decision [2] that non-disclosure of a significant amount of PPI commission earned by a lender created unfairness in the lender/borrower relationship).

The FCA has now published its final PPI policy statement, the key aspects of which largely mirror the FCA’s proposals as laid out in November 2015, but with some notable changes.  These are summarised below.

  • The deadline for consumers to complain about the way they were sold PPI will be 29 August 2019.
  • An FCA-led consumer communications campaign to inform consumers of the complaints deadline will commence in August 2017. The campaign will be funded by a new fee rule affecting the 18 firms that each reported over 100,000 complaints about advising, selling and arranging PPI from 1 August 2009 to 1 August 2015, and which together represent over 90% of all such PPI complaints reported in that period.
  • Detailed rules and guidance for lenders’ handling of PPI complaints are explained in Chapter 4 of the final policy statement and will come into force on 29 August 2017.
  • In particular, the rules will cover profit share sums as well as commissions in the Plevin assessment of fairness and redress [3]. The profit share rules require firms to assess whether commission rates which they knew, or could reasonably foresee, at the point of sale, plus anticipated profit share were:
    • for single premium PPI, more than 50% of the total amount paid by the consumer in relation to the policy or
    • for regular premium PPI, at any time in the relevant periods, more than 50% of the total amount paid by the consumer in relation to the policy in respect of the relevant period[s].
  • The rules will also require firms to write to previously rejected mis-selling complainants who are eligible to complain again in light of Plevin, to inform them of this.
  • Firms will be required not to apply the deadline to future complaints which concern a rejected claim on a live PPI policy if the rejection was for reasons connected to the sale (such as ineligibility, exclusions or limitations).
  • In line with industry feedback, the final rules now also provide that a decision by the seller to pay redress on the basis that, but for the sales failings, the complainant would not have bought the PPI extinguishes any claim for redress that the consumer might have concerning undisclosed commission.

The new package of rules and guidance is quite detailed and complex in parts. The FCA has said that it will take forward proactive supervisory engagement with firms and will monitor and challenge firms to ensure PPI complaints are dealt with fairly and promptly.

For more advice on PPI mis-selling claims and lenders’ regulatory obligations, please do not hesitate to contact a member of the Banking Litigation team.

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[1] Access our earlier briefings here.
[2] Plevin v Paragon Personal Finance Limited [2014] UKSC 61
[3] that is, the assessment whether failure to disclose a commission or profit share gave rise to an unfair relationship between the lender and borrower, and therefore whether redress should be paid.

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