On the morning of 2 August 2016, the FCA published CP 16/20 its response to feedback it had received on its proposals regarding the handling of Payment Protection Insurance (“PPI“) mis-selling complaints. The FCA’s original proposals were set out in CP 15/39 (see our blog post).
Following feedback from firms, trade bodies, consumer organisations, claims management companies (“CMCs“) and individuals, the FCA still considers that the proposed package of measures laid out in CP 15/39 should be taken forward, albeit with some specific changes.
A further ten week consultation will follow the publication of CP16/20, ending on 11 October 2016. The amendments to the provisions of the FCA Handbook relevant to PPI mis-selling will be published in December 2016, to come into force in March 2017. The deadline for submission of PPI mis-selling complaints is to expire in June 2019.
A high level summary the FCA’s response to the feedback received is as follows:
The FCA has advised that it cannot reasonably estimate the likely increase in complaint volumes or identify in advance which firms might be affected ahead of a deadline for the submission of PPI mis-selling complaints. If firms find themselves in difficulty they can take advantage of existing flexibility rules on usual time limits where there is a good reason for delay.
Consumer Communications Campaign
As first outlined in CP15/39 In the two year period prior to the deadline for mis-selling complaints, the FCA will engage in a £42.2M publicity campaign to publicise customers’ rights. The campaign will be structured in four “waves”, and will include broadcasts, outdoor media, digital media, an online “hub” and a telephone helpline.
The FCA maintained its view that it would be “disproportionate and hard to justify” compelling firms to proactively contact further customer contact exercises ahead of the deadline or in light of the new rules on disclosure of commission.
In respect of previously rejected complaints, the FCA was explicit that a customer who has not previously complained about unfair commission levels may bring a “new” complaint in relation to non-disclosure of commission, irrespective of when they had received the firm’s final response to an earlier mis-selling complaint.
The Fee Rule
Some responses from industry suggested that firms who had received most PPI complaints had already incurred the most costs and so should not be targeted to pay for the campaign.
The FCA disagrees that these firms have ‘already paid their share.’ This is because proactive mailings to customers have mainly concerned sales made after January 2005, which for most firms are a minority of their historic PPI sales, and, secondly, it is still the case for most firms that only a minority of their past PPI sales have been complained about.
Handling PPI complaints in light of Plevin
Subject to certain key changes, the FCA’s proposals for an additional regime relating to complaints about unfair commission levels remained as expressed in CP15/39.
The FCA disagreed with a number of responses from industry which argued that Regular Premium PPI was very different from Single Premium PPI, and declined to make any distinction between the different types of policy in the new rules.
As expected, the definition of “commission” for the purposes of assessing unfair commission was expanded to include profit share. The 50% “tipping point” for commission being deemed unfair was also retained, as was the means of calculating redress by reference to the difference between the actual commission paid, and the “fair commission of 50%.
Acknowledging that commission levels may have varied over the life of a PPI policy, the FCA specified that the appropriate commission level/profit share to consider when assessing complaint is that at the time of the sale, and that reasonably foreseeable at the time of sale.
Finally, in a nod to the fact that firms often no longer hold the records containing commission information in relation to PPI sales, the FCA stated that firms should make reasonable assumptions when considering affected complaints.
The FCA has stated that the rules and guidance concerning the deadline, fee, and PPI complaints handling and Plevin will be issued by December 2016, to come into force by the end of March 2017. The deadline rule would come into force by the end of June 2017 with the consumer communications campaign starting at the same time. The deadline would then occur two years later, by the end of June 2019.
However, this timetable is subject to a number of variables including some stakeholders potentially challenging the rules and guidance in court. If the FCA becomes aware that they are likely to depart from the proposed dates, they will issue further updates.