UK Finance: Long Awaited Certainty on Cut-off for PPI Claims
In a previous blog post, we discussed how the UK Financial Conduct Authority (“FCA“) was backing a call by the banks for the introduction of a two year cut-off for PPI claims.
The FCA has now announced that the final deadline for making a new PPI complaint will be 29 August 2019. Andrew Bailey (Chief Executive of the FCA) commented that “putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off. We believe that two years is a reasonable time for consumers to decide whether they wish to make a complaint“.
It is important to note that the deadline will not apply to: (i) PPI policies sold after 29 August 2017 and (ii) consumers with ‘live’ PPI policies who find themselves in the situation of having a claim on their PPI policy rejected for reasons related to the sale of that policy – for example, exclusions under the policy. In addition, the deadline only applies to complaints to the Financial Ombudsman Service and not to Court proceedings.
Our previous post also reported that the FCA was considering changes to the rules and guidance for the handling of PPI complaints in light of Plevin v Paragon Personal Finance Ltd. In Plevin, the Supreme Court held that the non-disclosure of commission during the sale of a PPI policy could result in an unfair relationship with a lender (under the Consumer Credit Act 1974).
Post-Plevin, the FCA has introduced a 50% commission “tipping point” – i.e. when considering a PPI complaint, one should presume that failing to disclose commission of 50% or more will have resulted in the creation of an unfair relationship between consumer and lender. Redress for the consumer will be any commission paid by the consumer over the 50% tipping point (for example, if the commission is 75%, the redress to the consumer would be 25%). In addition, profit share must be factored into redress (profit share being any benefit arranged by the lender/firm to receive back some of the sum paid in relation to the PPI policy by the consumer, which had initially been paid over to the insurer). In practical terms, this is expected to be difficult as many firms will not have kept a record of profit share agreements by reference to individual PPI policies.
As such, there are likely to be complainants who previously had PPI complaints rejected who could now complain under the new FCA guidance post-Plevin. The FCA will require all firms to write to previously rejected complainants who may now be eligible to complain, providing an explanation as to why they may have new grounds for a complaint. However, if a complainant has previously received redress (even if only partial), they will not be able to submit a new complaint relying upon the guidance post-Plevin.
What are the next two years likely to bring?
Whilst it is unlikely that lenders will be at the receiving end of an influx of PPI claims on the same level as they experienced some five or six years ago, both the FCA deadline and the new guidance post Plevin is likely to prompt further complaints activity in this area. In addition, lenders will need to ensure that they communicate with consumers who may be eligible to make a new complaint in light of the Plevinguidance.