LONDON (Reuters) - Britons who were missold loan insurance, in what turned out to be the country’s costliest consumer finance scandal, will have until 2018 to claim compensation under regulatory plans intended to draw a line under the issue.
Britain’s banks, which have already set aside more than 28 billion pounds ($42 billion) to cover payment protection insurance (PPI) complaints are also keen to close the issue. Lloyds Banking Group LLOY.L alone is accounting for about half the total compensation payments.
The banking watchdog, in a consultation paper published on Thursday, set out new rules on PPI complaints and said a campaign to inform consumers about the time limit would be funded by banks who missold the insurance.
The Financial Conduct Authority (FCA) proposed setting a deadline for new complaints on PPI sales of two years after the start date of the new rules, meaning some time in 2018.
“Consumers who are unhappy about PPI should continue to complain to the firms concerned and to the Financial Ombudsman Service if they are not satisfied with the response,” the FCA said in a statement.
Making a complaint is free and most people should not need to use a claims management company to help them, it added.
Thursday’s announcement is largely in line with a pre-announcement by the FCA in October on PPI, which was intended to give borrowers cover against possible default on a loan, such as a mortgage, but was often missold to people would could not make a claim.
Consumer campaign website MoneySavingExpert.com said the proposed new rules and time limit were a “done deal”, and was disappointed the deadline for claims was not longer to give consumers more time.
The regulator said the same deadline would apply to complaints being contemplated following the so-called Plevin landmark ruling last year by the Supreme Court, which suggested there might be additional cause for complaint concerning commissions paid on PPI sales. A commission of 50 percent or more on a PPI sale should be deemed unfair, with the customer potentially eligible for compensation. However, the FCA proposed some additional flexibility around this threshold, such as when it concerns particularly vulnerable people.
The average commission was about 67 percent and compensation would be paid on commission above the 50 percent “unfair” threshold.
The watchdog said its consumer communications campaign would cost 42.2 million pounds or 3.64 pounds per PPI complaint, paid by 18 lenders over two years in proportion to their level of PPI complaints.
The FCA said it could not reasonably estimate the costs and benefits of the planned new rules and communications campaign.
($1 = 0.6633 pounds)
Additional reporting by Steve Slater; Editing by Jane Merriman and Susan Fenton