By June 2019, the Financial Conduct Authority is authorising banks to close down their PPI claim centres and reception of any late PPI claims from the June deadline they can immediately reject. The new PPI claims deadline is clearly in favour of banks and consumers are powerless to stop its advance.
Consumers must make a claim unless they are willing to wait for a long while. Lines and queues to the Financial Ombudsman service may be longer as the year closes to 2019. One might say that it is still four years ahead. However, while few are still going through the process, it would be best to take advantage of the situation.
Make sure you have every receipt of every PPI repayment and billing the bank has issued to you. You could request a Data Access Request for £10 from your bank. This is helpful for PPI policies repaid for more than six years as it overrides the bank rule that it keeps records of over six years.
Evidence that shows you were ineligible for PPI include your pensions receipts, a birth certificate, a self-employment/business certificate or a medical certificate in case of already-existing medical conditions.
It may seem confusing at first because most claims management companies marketing their services to consumer would say “claim your PPI refunds now.” Sometimes, this interchanges with “claim your mis-sold PPI compensation today.” When you make a claim, they tell you that you can get both refunds and compensation, making things confusing for everyone.
What Are PPI Refunds?
The amounts consumers have repaid in the last few years for a PPI policy they are ineligible to use banks must return in full amounts. A full amount means the complete value of the policy during the time it was purchased.
If it was purchased during the 90s, the PPI’s original total during the time is what the bank needs to repay.
What Are PPI Compensation?
In addition to the amounts banks need to repay are compound interest rates for financing that includes PPI as a feature or perk. As the PPI’s value increases with every missed repayment, the amounts of interest increases the banks must calculate to ensure that the complete refund reaches the customer.
PPI compensation is then calculated by finding the 8% compensation amount from the total PPI refund value. The 8% compensation is multiplied depending on the number of years the PPI was paid for. If the amount was paid for five years as an example, the equation is 8%x5= PPI compensation.
Many consumers have no idea they were mis-sold the insurance policy firsthand.
During the 90s up to the year 2007, bank employees recommended that loan-applying consumers purchase payment protection insurance policies.
They presented the policies as ‘crucial’ for loan application success given that a PPI removes the risk of the consumer’s inability to pay during his or her sickness, unemployment or accident stages in life.
But PPI’s provisions are not general. As with any other insurance policy PPI is designed for specific and eligible individuals. Bank employees removed the right of consumers to choose a PPI company of their own choice.
About 50% of the UK population think they may be mis-sold PPI. The reluctance of the banking industry to help resolve consumer issues quickly had further made it difficult to ascertain whether a consumer has payment protection insurance policies.
The huge income of claims to banks and the Financial Ombudsman Service is no fault of the claims company who only processes the claims to find out if it was truly mis-sold. The Financial Conduct Authority had once called on banks to call consumers who were mis-sold PPI based on their records — this responsibility they shunned that could have avoided their current troubles.
The FCA-imposed PPI claim deadline is unfair to consumers but banks will suffer huge losses by June 2019 because PPI is still on the rise due to their own fault.
The Financial Ombudsman Service reports having received an extra 43,000 PPI claims between July and September after banks initially rejected customer’s claims for compensation.
About 57% of the complaints forwarded from banks the Ombudsman ruled in favour of consumers
Other complaints trailed with only a fraction of the number of PPI complaints. Packaged Bank Accounts — the second largest number of complaints aside from payment protection insurance — only have 5,317 during the quarter.
Experts said the figures remain an immense problem for the banking industry as complaints still continue to flood in.
According to New City Agenda, about £40bn had been set aside by banks to pay recompense to consumers mis-sold PPI policies since the 90s. Banks hired thousands of qualified employees to handle the complaints efficiently.
Banks have only about £25bn of the £40bn total creating dents in their profit margins.
Official figures from their quarterly profits report indicate that Lloyds had set aside a total of £17.1bn since the beginning of the financial scandal. Barclays has a total of £8.5bn; RBS with a total of £4.7bn and HSBC with about £2.9bn in total recompense amounts.
The Financial Ombudsman Service — mediating consumer-business issues since before the PPI scandal — reports that payment protection insurance dominates the top tier of its workload.
The Ombudsman reports receiving an extra 43,000 complaints between July and September after banks rejected their consumer’s legitimate PPI claims.
About 57% of these complaints continued to be upheld in favour of consumers.
The Ombudsman said PBAs or Packaged Bank Accounts were the second most complained-about financial products after PPI.
The number of PBAs are unequal to PPI with just 5,317 during the same quarter, not more than half the FOS’ PPI troubles.
After their announcement of profit results, the UK’s banking industry is to provide a further £1.5bn for their PPI misgivings.
Analysts are split whether PPI would truly end by the June 2019 deadline the City watchdog had imposed.
The City watchdog said June 2019 is the final cut-off point for any new complaints it would lodge with banks.
Lloyds has set aside more than £17.1bn more than other banks. Barclays is at £8.5bn. RBS and HSBC now have a total of £4.7bn and £2.9bn respectively.
Single premium PPI policies had been banned from sale immediately in 2011 after the then-FSA had won against the banking industry’s legal challenge of banning claims rules to streamline the claiming process for consumer PPI claims.
The Royal Bank of Scotland faces huge deficits and possible profit slides after it suffers its eighth consecutive loss last year and possibly this year. It had set aside billions of pounds for payment protection insurance mis-selling along with millions of pounds in fines to US authorities over the alleged mis-selling of mortgage securities before the 2008 financial crisis.
The sell-off had triggered a state bailout of RBS. It has a public majority stake even during the time it began to mis-sell PPI to consumers.
RBS had made a loss after taxes of £469mn in the last three months to September 30. Fines, litigation and other costs had it cut a further £425mn from its coffers — most losses the bank attributes to the US fines.
RBS shares had bogged down 2% at 192 during the noon.
Aside from RBS, Lloyds and Barclays said they will set aside a combined £1.6bn PPI package contribution to recompense consumers further for this year.
The scandal — slated to end by 2019 with a Watchdog-scheduled deadline — may further balloon losses for the banking industry as the deadline extends one year after the initial 2018 schedule.