Financial firms facing payment protection insurance (PPI) complaints should presume that if they failed to disclose charging commission of 50 percent or more, the contract is “unfair”, according to new proposals.
The Financial Conduct Authority (FCA) announced the proposal (subject to consultation) this morning in a major new update on its plans for further intervention into how PPI complaints are handled.
The change could add significantly to the £20bn in redress that has already been paid to more than 10 million PPI consumers so far. If a contract is deemed unfair due to this non disclosure, financial redress will be due.
The proposal is just one of several new ways in which the FCA plans to tackle PPI complaints.
A highly detailed update this morning includes the FCA’s plans for a consultation, by the end of 2015, on new rules and guidance for PPI cases.
The regulator will consult on setting a new final deadline of spring 2018 for all PPI complaints, along with a communication campaign to encourage consumers to send in any outstanding complaints. Under the proposals financial service providers will foot the bill for this campaign.
A big part of the consultation will be new rules for dealing with PPI cases that centre on commission being charged, in light of the Supreme Court ruling on Plevin.
Rather than a standard case about mis-selling, this was about the non-disclosure of commission being charged on a PPI product.
The ruling in November 2014 held that Susan Plevin was treated unfairly because she wasn’t told about the commission taken from her PPI payment.
There were concerns the ruling would open firms to a torrent of further PPI redress and the FCA has now proposed that when assessing PPI claims, failure to disclose commission of 50 per cent or more being taken is unfair, and that redress is therefore due.
The consultation, however, will still look at how PPI complaints are managed fairly in light of the Plevin judgment concerning a claim under s.140A of the Consumer Credit Act 1974.
The FCA will consult on limited circumstances where the non-disclosure of commission of less than 50 percent could be regarded as giving rise to an unfair relationship under s.140A.
By Marcel LeGouais