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Screenshot of a breaking news alert e-mail from Q2 2017
The following guest post is courtesy of Kamran Mirshahi, founder and director of the leading PPI claims company, Canary Claims.
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The beginning of April saw the Financial Conduct Authority release its latest PPI deadline advertisement. The first announcement of the deadline last August has encouraged UK consumers to check if they were mis-sold PPI. Some policies were mis-sold as far back as the 1980s, meaning thousands of consumers could be due a refund.
The FCA and PPI claim companies are encouraging consumers to make a claim sooner, rather than to put it off. We predict that as the August 2019 deadline gets closer, more people will submit claims. This could create a hefty backlog for the banks to deal with.
A landmark court ruling in 2014 means the banks are now potentially dealing with even more claims. The Plevin case saw Mrs Susan Plevin take her case against Paragon Personal Finance to court because 71% of her PPI sale was a commission. The court ruled in her favour that this was also a form of mis-selling. The Plevin case means that consumers can make a PPI claim if over 50% of their PPI sale was a commission. The norm for banks was to charge 67% as commission, thus creating thousands more claims to be put forward.
Even if the banks previously rejected claims, consumers can make another under the Plevin rule. This intensifies pressure on the banks, though some more than others. Lloyds has revealed that it is receiving 11,000 claims a week — more than the estimated amount. As the biggest offender of mis-sold PPI, the banking group has paid out £18 billion in total. This amount is for consumer claims, fines, extra employees and a contribution towards the PPI deadline campaign.
The latest figures from the FCA show that the banks have £30 billion to customers for mis-sold PPI. With the clock ticking until the PPI deadline, much more will be paid out before the cut-off date. If they continue to pay out as much as they have in the past seven years, the total amount repaid for PPI claims is likely to rise to over £40 billion.
Despite August 2019 being the cut-off date, it’s likely that the banks will be repaying customers for months afterwards, as they work through the backlog of claims. The Financial Ombudsman (FOS) is dealing with a huge number of claims at the moment, stating that it can take up to two years to resolve each case.
However, the FOS is coming under increasing scrutiny due to Channel 4’s Dispatches programme. It highlighted inadequate staff training and a lack of knowledge within the organisation about financial products. While it is unlikely that cases will be reopened, both consumers and the government are concerned about the fairness of claims. An independent review of the FOS will take place. If the review demonstrates a lack of regulation, it could cause even more issues for PPI claims and those who have previously used the FOS service.
In the meantime, banks and PPI claim companies are seeing cases pile up, as consumers begin to form a queue to ensure they reclaim the money they’re owed before the deadline.