iac-education
iac-education

News

Back to News

PPI: the end is in sight

By Zoe Henry | 30th November 2015

PPI: the end is in sight

Money Market UK.com the finance consumer publication recently published a noteworthy article PPI: the end is in sight. On 2 October the FCA announced that there is a plan to put a deadline in place. They told the press, “The FCA intends to consult on a deadline falling two years from the date the proposed rule comes into force – which, subject to consultation, would not, we anticipate, be before spring 2016 – hence PPI consumers would have until at least spring 2018 to complain.”

The PPI debacle started when banks sold the plan as a financial safety net for people who lost their jobs.

Who here among us has not had those annoying telephone calls asking whether or not you’ve been mis-sold Payment Protection Insurance (PPI)? Or seen those ads on TV urging you to call them with your bank details? It has all the hallmarks of a phishing scam, but the truth is that PPI exists and some people really have been compensated for their banks mis-selling it to them.

The whole PPI debacle started back in the early 1990s, when banks sold the protection plan as a financial safety net for people who lost their jobs or became too sick to work. However, the banks did not explain properly that the plan was optional, or take into consideration that some customers might not need it. This went on for about 20 years, and in 2005 the banks’ behaviour finally caught up with them. To date, the banks have paid out more than £26 billion in compensation to around 10 million customers.

In addition to this, individual banks have been fined by the Financial Conduct Authority (FCA) for failing to handle PPI customer complaints fairly, with Lloyd’s Banking Group being hit the hardest with a £117 million fine. For the last 10 years, it has seemed that the PPI situation would be an eternal one, and a mistake that the banks would be paying for until the end of time.

However, on 2 October the FCA announced that there is a plan to put a deadline in place. They told the press, “The FCA intends to consult on a deadline falling two years from the date the proposed rule comes into force – which, subject to consultation, would not, we anticipate, be before spring 2016 – hence PPI consumers would have until at least spring 2018 to complain.”

The reasons for the deadline are myriad, but the highlighted catalysts are: the management companies complaining on behalf of the consumers are charging the consumers to do so; many of the complaints end up not involving PPI; and the open-ended nature of the complaints-led approach is leading to consumer inertia.

The deadline may be two and a half years away, and the whole situation may be totally irrelevant to you. But if nothing else, at least it will put an end to those annoying phone calls.