Which? warns of the dangers of a PPI time limit Limit sets unwelcome precedent and risks more nuisance calls

13 April 2016

Bank PPI FSA time bar

The introduction of a time limit on PPI compensation claims will set a dangerous precedent and could lead to a further increase in nuisance calls, Which? warns.

There is concern that a two-year time limit for PPI complaints will set a dangerous precedent and result in banks having little incentive to pay out compensation swiftly and directly to consumers in future mis-selling scandals.

It is also highly likely that introducing a time limit for PPI complaints will result in a huge increase in nuisance calls from Claims Management Companies (CMCs). 

In 2015, there were 32,739 complaints to the Information Commissioner's Office regarding CMCs making PPI nuisance calls, an increase of 85% on the previous year.

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PPI-claim time bar is ill-judged

Which? executive director Richard Lloyd said: ‘The Financial Conduct Authority (FCA) must rethink its ill-judged proposals to introduce a time limit for PPI claims. 

'If banks and other PPI providers had been more proactive, then this whole process would have cost less and driven fewer people to use CMCs.

‘The regulator should instead bring forward new proposals so that banks make it more straightforward for people to make a claim without a costly CMC and get back all the money they are rightly owed.’

He further added: ‘We also need to see tougher regulation of CMCs put in place without delay, otherwise nuisance calls will increase as they try to cash in on the regulator's plans.’

Before the FCA goes ahead with any proposals for a time limit, Which? wants to see:

  • a simpler process for making a claim, with banks required to accept complaints electronically
  • tighter regulation of CMCs, with directors personally accountable if their company breaks nuisance calls rules
  • more information published about how firms have handled claims to date, the amount of redress outstanding and how the FCA will judge the time limit to be a success.

Ineffective complaints-driven approach

Which? strongly disagrees with the FCA that implementing a complaints-driven approach to PPI compensation has been effective.

Putting the onus on consumers to make a claim when they might not know they have reason to complain is not the most cost-effective way to ensure that consumers get their money back.

Nearly a third of all complaints made to banks about PPI have been brought by CMCs on behalf of consumers. These CMCs can then charge fees of up to third of any compensation offered.

And, research published by the National Audit office earlier this year estimates that claims management companies may have taken between £3.8 billion and £5 billion of the £22.2 billion of compensation paid out between April 2011 and November 2015.

PPI accounted for 63% of all complaints to the Financial Ombudsman Service in 2015 and there is still a shockingly high proportion of these complaints being upheld in favour of the consumer.

It is clear that banks must do more to improve and simplify their processes for handling PPI complaints.

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