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Saturday, 3 October 2015

FCA OPENS FLOODGATES ON PPI CLAIMS

Everyone who bought Payment Protection Insurance (PPI) and paid premiums on 6 April 2008 or later can claim redress* after a court ruling last year. Yes. Everyone. The floodgates have been opened by the Financial Conduct Authority, though that was not the regulator's intention.

The problem was caused by the greed of the banks who mis-sold PPI on an industrial scale for more than a decade. The Supreme Court ruled last year in a case brought by Susan Plevin that the commission earned by the banks was so excessive they should have told customers what it was. If they didn't the sale was invalid.

In the Plevin case the commission was 72% of the sale. The FCA says the average mark up was around 67%. In other words for every £100 paid by customers the bank kept £67 and passed on only £33 to the insurer to pay for the actual insurance - and that still left a hefty profit for the insurer! And the FCA says - though it is not immediately clear why it picked this figure - that any commission of more than 50% means the sale was unfair.

That ruling opens the door to fresh claims from everyone whose PPI redress claim has been turned down.

Under the rules the Financial Conduct Authority (FCA) says it intends to make, it seems likely that every sale of PPI which was still being paid on 6 April 2008 (the date a key law came into force) will be covered if
  • The commission was over 50% (it just about always was), and
  • The customer was not told what the commission was (they never were).
Anyone who has already had PPI redress will not, of course, qualify again.

Claims under existing rules
Anyone who has not yet claimed would do better claiming under the existing rules initially as they will probably get more.

The average payout is between £2500 and £3000. Around seven million successful claims have been made. Banks are paying out an average of £388 billion a month in redress.

You can find out how to claim full PPI redress yourself at Money Saving Expert or Which? If your claim is refused go to the Financial Ombudsman Service as it upholds seven out of ten appeals. You do not need to use a claims management company. They will be no more successful than you and will take up to 40% of the money you're paid.

Plevin rules
Anyone who has claimed and been turned down - or that happens to them in future - can now claim again under these new Plevin rules. The rules above are only indications of what the FCA will eventually do. The final rules are expected in Spring 2016.

The FCA says it will only expect firms to pay limited redress under these rules which will consist of
  • the premiums minus what they would have been if the commission had been 50%
  • the interest paid on those premiums by the customer
  • 8% a year simple interest on that total
That view may be challenged. There is an argument that if the sale was invalid then all the premiums should be refunded not just the bit over 50%. Nor is it clear why 50% commission is 'fair'. My latest blog explains why they are wrong. Wait for the full rules to be published in Spring 2016 before making any Plevin claim.

Meanwhile claim full redress for mis-selling under the current rules if you have not already done so. If you have and have been turned down consider an appeal to the Financial Ombudsman Service. That normally has to be made within six months of a final Ombudsman decision.

2018 cut-off
The FCA also wants to stop any new claims - under the old rules or the new Plevin rules - from Spring 2018. The banks have been demanding a cut-off for some years. If it goes ahead with that plan there are just two and half years left to get your claim in.

For a full PPI claim under the existing rules do it as soon as possible using one of the two websites linked to above.

For a fresh claim under the Plevin rules it is probably best to wait until the final rules are made in Spring 2016.

*Redress?
I use the word 'redress' not 'compensation' because there is no compensation being paid. You are simply being repaid - with interest - the premiums you were tricked into paying by venal banks determined to make as much money from their customers as they could get away with.

4 October 2015
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