Britain’s financial watchdog has raised the possibility of introducing a time limit on complaints about payment protection insurance, the mis-selling scandal that has cost banks more than £17bn in compensation.
The Financial Conduct Authority will look at trends in complaints and will then “consider whether further interventions may be appropriate”. The FCA said those interventions could include a time limit on complaints and other rule changes.
The watchdog will announce conclusions to its study in the summer.
In January 2013, the banks tried to persuade the FSA, the FCA’s predecessor, to set a deadline of April 2014 for people to claim compensation for mis-sold PPI. The British Bankers Association said its members would fund a year-long advertising campaign to make people aware of the change.
However, the banks’ plan was met with outrage from consumer groups.
“It’s good that the regulator is finally checking up on how banks are handling the PPI complaints scandal. It has been clear for years that banks should be doing more to resolve claims fairly and make it as quick and easy as possible for people to get back the money they’re entitled to. People shouldn’t be forced to take their complaint to the Financial Ombudsman, or use unscrupulous claims management companies,” said Which? executive director, Richard Lloyd.
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.”
The FSA said it would only ever consider a time bar if was convinced it was “in the interests of customers”.
It is not the first time the idea of time barring financial complaints has caused controversy.
Ten years ago, insurance companies began time barring complaints for endowment mis-selling, giving their customers three years to complain from the day they received a “reprojection” letter warning of an endowment shortfall.
While endowment claims have come to an end, the tide of PPI complaints looks unlikely to stop in the near future.
Earlier this month the UK’s chief financial ombudsman, Caroline Wayman, said banks will be paying PPI compensation for years to come. The Financial Ombudsman Service, which customers can turn to in a dispute with a lender, receives 4,000 new PPI cases every week. However, this is a considerable drop from the 12,000 a week it was receiving 18 months ago.
Since January 2011, banks have paid out £17.3bn in compensation to customers who were mis-sold the controversial insurance, which promised that loan payments would be covered if borrowers found themselves unable to work. They handled more than 14m complaints and upheld over 70% of the total. They have set aside more money to cover claims, with the total cost of scandal expected to reach £24bn. Lloyds Banking Group has by far the biggest PPI bill of any lender, at £11bn.
Banks and other lenders sold about 45m PPI policies between 1990 and 2010, alongside loans, mortgages and credit cards to protect customers against non-payment if they became ill or unemployment. But in many cases customers were pressured into taking out PPI even though exclusions meant they could never have claimed on the policy, or it was added to their loan without their knowledge.
Read more: FCA could call time on PPI claims