On 2 March 2017 the FCA finally published its PPI Policy Statement (PS17/3), which includes finalised rules and guidance on payment protection insurance (PPI) complaints and Plevin. The PS completes the PPI consultation process which began in November 2015. We set out below the key points and the dates to remember.
The PS sets out the way forward:
- A new rule that sets a deadline by which consumers will need to make their PPI complaints or lose their right to have them assessed by firms or by the Financial Ombudsman Service (the FOS). This deadline is 29 August 2019.
- An FCA led communications campaign designed to tell consumers of the deadline. This will begin when the deadline rule comes into force on 29 August 2017.
- There will be a new fee rule on 18 firms which will fund the consumer communications campaign. This will come into force on 31 March 2017, with the first half of the fee collected one month later.
- A set of new DISP rules and guidance on the handling of PPI complaints in light of the Supreme Court's decision in Plevin. These come into force on 29 August 2017.
Key points to note
Key changes from the last Consultation Paper (CP16/20)
- Firms that sold PPI must write to previously rejected mis-selling complainants who are eligible to complain again in light of Plevin and explain they can make another complaint.
- Firms must not apply the deadline to future complaints which concern a rejected claim on a live PPI policy, if the claim was rejected for reasons connected to the sale, such as ineligibility, exclusions or limitations.
- To give firms more time to prepare to implement the FCA approach, and the FCA more time to supervise the preparations, the rules surrounding Plevin will come into effect at the same time as the deadline rule – not three months before as originally planned.
- The campaign will run across multiple channels, including advertising, partnerships and PR activity. All communications will signpost consumers initially to the FCA's PPI website or to the FCA's PPI helpline.
- The PPI website and helpline will offer consumers all the information they need to make a decision on whether to check or make a complaint about PPI.
- The FCA has made the decision to include (like it proposed) profit share in the definition of commissions. Undisclosed profit share commission will be treated exactly the same as undisclosed commission.
- The provisions on profit share are detailed. In summary, the FCA expects firms to assess whether the commission rates which it knew or could reasonably foresee at the point of sale (plus anticipated profit share) was, for a single premium PPI policy, more that 50% of the total amount paid by the consumer for the policy, or, for a regular premium PPI policy, was at any time in the relevant period or periods, more than 50% of the total amount paid by the consumer for the policy for the relevant period or periods.
- The FCA's approach includes a 50% commission 'tipping point' at which firms should presume that the failure to disclose commission gave rise to an unfair relationship.
- There has been a slight change to the final approach to redress. Any decision by the seller (at Step 1) to pay redress (on the basis that, but for the sales failings, the complainant would not have bought the PPI they bought) extinguishes any claim for redress the consumer may have at Step 2 (concerning undisclosed commission). This is so even if the Step 1 redress paid is less than the full return of premium (because, for example, it was alternative redress or reduced because of a previous successful claim on the policy). It is also the case whether the seller and lender are different firms or the same.
- Where a firm concludes that an unfair relationship under section 140A has arisen as a result of the undisclosed commission, the firm should pay redress consisting of 3 elements – (1) the difference between the commission actually paid and 50% of the premium paid, plus (2) the historic interest the customer has paid on that proportion of the premium (where relevant), plus (3) annual simple interest at 8% on both these sums.
- Given the complexities of assessing a McWilliam-type complaint, and the fact that the legal remedy for such a complaint would be different from those of the FCA's DISP App 3 rules and guidance for PPI complaints, the FCA has agreed that these complaints are best treated outside of DISP App 3.
- Complaints about PPI Policies sold after 29 August 2017 are not subject to the deadline.
Next steps and key dates
- Until the final rules and guidance on PPI complaints and Plevin come into force, firms will still be able (under the existing FCA complaint-handling rules) to explain to a complainant that they cannot yet provide a final response for complaints that could be affected.
- When the final rules and guidance on PPI complaints in light of Plevin come into force, the FCA says they will expect firms to provide fair and prompt final responses to complaints they have put on hold.
- The FCA will adopt a robust supervisory engagement with firms, including continuing to monitor and challenge them to ensure that they deal fairly and promptly with complaints and are cooperating with the FOS.
- These dates are subject to any judicial review. We understand that some large claims management companies have already obtained Counsel’s opinion on the prospects of a judicial review.
For further advice and further information, please do not hesitate to contact a member of our team.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at March 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.