Belfast Telegraph

UK Website Of The Year

Banks face further PPI hit as watchdog extends claims deadline to June 2019

Published 02/08/2016

FCA chief executive Andrew Bailey said putting a deadline on PPI complaints would bring the issue to an orderly conclusion
FCA chief executive Andrew Bailey said putting a deadline on PPI complaints would bring the issue to an orderly conclusion

Banks are facing a further hefty hit from the payment protection insurance scandal after the City watchdog extended its proposed deadline for claims by more than a year.

Consumers will have until June 2019 to claim compensation for payment protection insurance (PPI) mis-selling under plans outlined by the Financial Conduct Authority (FCA).

It had originally proposed a spring 2018 cut-off for claims.

Shares in banking groups slumped into the red as the new deadline is set to escalate the total bill for the PPI scandal, which has already been the costliest yet for the financial services industry at well over £30 billion.

One banking expert warned the extended deadline could see each bank put by hundreds of millions of pounds more to cover claims.

Lloyds Banking Group - by far the worst affected by the PPI scandal - said it was "disappointed" that the deadline will not come into effect until June 2019.

But it stressed its rate of complaints were falling rapidly and said it would not increase money set aside for PPI "at this stage", with £2 billion of unused provisions.

Shares in Royal Bank of Scotland and Barclays dropped 3%, while Lloyds was 2% lower.

The FCA confirmed plans to launch a marketing campaign from next June, which will be funded by Britain's banks, to raise awareness of the 2019 deadline for claims to be submitted.

It admitted the deadline is later than first expected and later than a number of banks wanted.

But it said it gives time to prepare the marketing campaign and get plans in place for the deadline.

FCA chief executive Andrew Bailey said he hopes the cut-off will draw a line under the scandal.

"Putting a deadline on PPI complaints will bring the issue to an orderly conclusion in a way that protects both consumers and market integrity," he said.

He added: "We will ensure that our communications campaign will engage with all those who could be affected, particularly vulnerable consumers."

It will consider further feedback on its proposals for the deadline until October 11.

Gary Greenwood, Shore Capital's banking analyst, said banks had made their provisions to cover claims until mid-2018, which may see extra provisions of "a few hundred million pounds and perhaps as high as £1 billion".

PPI is still the most complained-about financial product, with recent figures from the Financial Ombudsman Service (FOS) revealing that a s many as 4,000 new complaints are received every week.

The FOS said it received 188,712 new PPI cases in 2015-16, making up just over half of its workload in the last financial year.

Around one in five PPI cases are resolved within three months.

Half-year results from Barclays last week revealed another £400 million charge for PPI in the second quarter, taking its total provisions to £7.8 billion.

Lloyds, which also posted figures last week, made no extra PPI provisions, although it received an average of 8,500 PPI claims each week in the first half.

It said this dropped to 6,700 in the last week - the lowest level since 2011.

Its total cost of the scandal dwarfs those of its rivals, with Lloyds having put by more than £16 billion so far since 2011.

A spokesman for the British Bankers' Association (BBA) said: "The FCA's announcement provides further clarity for consumers on the proposed timeframe for making PPI complaints.

"An awareness campaign will also help to ensure everyone who deserves compensation gets it.

"The easiest way for anyone who suspects they are owed compensation, is to talk directly to their bank. We will continue to work constructively with the FCA as they consult on these proposals."

Read More

From Belfast Telegraph