Banking industry, which is desperate to stem tide of PPI claims, is in talks with the FSA to set 2014 deadline
The financial watchdog has confirmed it is in talks with banks about setting a deadline for people to complain about mis-sold payment protection insurance (PPI) policies.
The British Bankers’ Association (BBA) has approached the Financial Services Authority (FSA) to suggest people be given until April 2014 to make a PPI claim – three years after the high court confirmed consumers must be compensated for mis-sold policies. After that it wants its members to be allowed to reject all claims.
If a deadline is imposed, the BBA said the banks would fund a year-long advertising campaign to make consumers aware of the change.
“We have had initial discussions and are prepared to consider the merits of this and other options,” the FSA said in a statement. “However, our key priority is to ensure consumers are protected, so the FSA board would need to be convinced that any proposals would be in the interests of consumers. A key consideration will be the potential to get compensation to more consumers, more quickly.”
The banking industry is desperate to stem the tide of PPI claims, which some sources estimate could end up costing those that mis-sold policies as much as £40bn. Banks and building societies have already put nearly £13bn aside to pay for claims.
At present, policyholders have the longer of either six years from when they were sold the product or three years from when they first became aware they might have cause to lodge a complaint.
The BBA said its discussions with the FSA were continuing, but its request for an April 2014 deadline is looking increasingly unrealistic as the watchdog has also confirmed it will seek the opinions of consumer groups before going ahead with a full public consultation.
The BBA’s plans will be further hampered by the fact banks have just started sending out letters to householders identified as being possibly at risk of mis-selling. Millions more will be sent out in the first half of this year. The letters tell householders they have a three-year deadline from receipt of the letter to make a claim, and so any change to this deadline would cause widespread confusion.
Consumer groups and campaigners were quick to express their concerns about the proposals for a PPI claims deadline. Martin Lewis of consumer website MoneySavingExpert.com said: “This is a disgraceful proposition from the banks. The FSA needs to laugh it out of the room and we will be lobbying hard for that to happen.
“It is likely that as few as one in five eligible customers have actually reclaimed. This money was wrongly taken from people due to systemic mis-selling and, on some occasions, downright deceit. That went on for over a decade. People should have at least as long as that to get their money back.”
Which? chief executive, Peter Vicary-Smith, said: “It’s in everyone’s interest to draw a line under this scandal, and time limit cut-offs already exist for PPI claims. Before even thinking about a new time bar the banks should be proactively contacting their customers and making it as easy as possible for people entitled to a legitimate refund to claim back their money, without any hassle.”
The Financial Ombudsman Service, which deals with claims rejected by banks, said last week it expects payouts to consumers for PPI cases to rocket this year. It expects to deal with about 250,000 cases in the next financial year and has taken on 1,000 extra staff to deal with these.