The PPI scandal has reached new heights with a £43 billion price tag from all UK banks that have mis-sold the policy. However, the Financial Conduct Authority had given banks a deadline for all consumer complaints. Sparking outrage from UK’s leading consumer groups, the FCA remains firm that its consumer communications campaign, which begins by August 29, 2017, can disseminate the necessary information to urge all UK consumers to make a claim as soon as possible.
The communications campaign will end exactly on August 29, 2019, the final date for claiming any mis-sold insurance refunds from the UK banking industry. In line with backdoor agreements, banks are to simplify their complaint procedures to the benefit of consumers.
The chances a UK consumer is mis-sold a payment protection insurance policy is high because almost 64 million units were sold from 1990 to 2010. Banks have yet to resolve half of the complaint figure since the insurance mis-selling was discovered in 2009.
UK’s consumer groups also question the effectiveness of the FCA’s consumer communications campaign. Non-tech savvy and television-centric retired customers will need to receive a formal letter regarding the state of their finances affairs instead of a television public service announcement. Most of the FCA’s campaign focuses on TV and online advertisements, which may leave out this age bracket.
The Financial Conduct Authority tasked all UK banks who had mis-sold PPI to make the procedure to make claims easier and faster. The imposition of a deadline will not be unfair to consumers affected by the unwanted insurance policy. Consumer groups were vocal when the FCA announced the deadline for claims without considering the consequences for consumers.
However, it is likely CMCs are the only ones who will find issues with the deadline. The Financial Ombudsman reports that 40% of consumer complaints were decided against the complainants. The service added that most of the complaints submitted came from claims management companies.
Meanwhile, the FCA will launch its advertising campaign aimed to explain the refund claiming process to consumers. It is likely to be the advertisement reporting Arnold Schwarzenegger reprising his role in the 80s “Total Recall” action movie explaining how to recall having a mis-sold PPI, and how to make a claim.
Lloyds Banking Group shocked its investors after claiming that it had only dealt with less than half of the PPI complaints it faces. However, with the deadline in place, Lloyds will enable itself to bypass millions of customers who were mis-sold policies by their employees. After the set PPI claim deadline, no consumer can forward a claim once again.
Lloyds revealed that it is only halfway to resolving all the PPI policies the bank has sold since the year 2000. Investors were shocked when the bank said it had only resolved half of the 15 million PPI policies. The UK bank had added £700m to its refund package. The bank had hoped its earlier allocation in 2016 would be the last.
The taxpayer-backed bank said it had sold an estimated 15 million PPI policies with mis-sold products unaccounted for. However, the bank’s total bill of £18bn is about to increase in the coming years before the resolution of PPI in 2019.
UK Watchdog the Financial Conduct Authority had set a PPI claims deadline to urge consumers to make a claim rather than put it off. However, consumer groups fear that the campaign is in vain because the elderly customers, which may have no TVs and are not fond of technology, can be left out by the £42.2m advertising campaign.
According to the Financial Ombudsman, it received 80,234 new complaints between April and June, but reports fewer payment protection insurance claims were upheld. Only 40 per cent were held in favor of customers during this period. PPI still dominates the queues of complaints taking 42,401 of the total complaints processed.
UK’s high-street bank sector allocate larger fiscal reserves for their payment protection insurance refund allocations. According to analysts, the bank industry is still struggling with its past misdeeds. All the banks have allocated hundreds of millions for PPI, which they predict would be their last allocation before the 2019 PPI deadline.
Before this arrives, RBS has added £396m for litigation costs and misconduct charges from the US Federal Housing Finance Agency. The bank’s charges come from its mis-selling of mortgage-backed securities in 2005, which proved to be toxic according to further regulator investigations.
Barclays had set aside £700m for its PPI refund package for the first half of 2017. The bank said its PPI costs, along with other profit losses, were necessary costs for its planned reforms.
Lloyds has allocated almost £1bn to provide for all its troubles. However, the bank is successfully re-integrating itself into the UK private sector.
The UK’s PPI claims crisis, from 2009, had accumulated more than £38bn in the last decade. The FCA had announced an August 29, 2019 deadline for all PPI complaints. According to FCA CEO Andrew Bailey, the deadline will urge consumers to make a claim instead of putting it off.
The PPI crisis takes a hefty toll on the UK banking industry’s profits. Lloyds has accounted for an additional £700m for its refunds. Barclays has followed suit with a £700m allocation. Both banks claim these amounts would suffice until the FCA’s PPI claim deadline on August 29, 2017.
UK’s banks and other financial institutions answer to the Bank of England. Stopping the PPI crisis would help the Bank of England’s efforts to improve the economy and implement its policies better; affiliate banks can provide their services to industry stakeholders. However, the crisis, which banks played a huge role in causing, continues to be disruptive to BoE policies.
The FCA’s PPI deadline would help banks rebuild their capital. Banks can then reach out to bigger clients to provide services, which help enforce the Bank of England’s policies.
The only downside to banks getting their way is the lack of improvement in both attitude and consumer policy. Consumer-troubling incentives for work volume motivated employees to sell the policy to ineligible consumers. The £38bn recompense package of the entire industry is a testament to the possible outcome of the deadline for the quality of service from the banking sector.