The service has received 20,000 new PPI-related complaints since it published its annual report in March, just after the Financial Conduct Authority (FCA) confirmed new rules and guidance about PPI and a two-year deadline for complaints about historical mis-selling. These new rules follow on from the Supreme Court's 2014 decision in the Plevin case, have provided "greater certainty" about how financial firms should handle claims dealing with PPI commission and profit share, according to principal ombudsman Richard Thompson.
There are now around 150,000 PPI complaints regarding undisclosed commissions based on the Plevin case that are sitting with the FOS awaiting resolution, and it intends to "move things forward as soon as we can" based on the particular circumstances of each individual complaint, Thompson said in an update (20-page / 2.6MB PDF), published on the FOS website.
PPI was intended to cover repayments due on loans or credit cards for people who could not afford them due to an accident, unemployment, sickness or death. However, these products were widely mis-sold to customers who in some cases were not told that a policy was optional or that the policy they were sold did not cover their circumstances.
In November 2014, the Supreme Court ruled that lender Paragon Personal Finance's failure to disclose a large commission payment on a single premium PPI policy made the relationship between it and its client, Susan Plevin, unfair as defined by the 1974 Consumer Credit Act. The decision gave some consumers new grounds on which to complain about the sale of a PPI policy, based on the commission received and whether this was disclosed by the lender.
The FCA has now confirmed that failure to disclose commission of 50% or more on a PPI policy sale should be presumed unfair, and any commission over this 'tipping point' should be repaid to the consumer. The new rules mean that the FOS can now proceed with resolving these complaints, and it has since been talking to businesses to make sure that they are able to provide the ombudsman with the information it needs in order to do so, Thompson said.
From 29 August, firms will be required to write out to those customers whose PPI mis-selling complaints were originally rejected but who may now be able to complain as a result of the issues raised in Plevin. Around 1.2 million people could be affected, according to FCA estimates. On this date, a two-year consumer communications campaign, funded by the industry, will also begin; with the intention of alerting customers who may be eligible to complain but have not yet done so to submit a complaint before the deadline of 29 August 2019.
Thompson said that it was impossible to estimate how many people would go on to complain as a result of the Plevin letters and communications campaign and, of those, what proportion of complaints would have to proceed to the FOS for final determination. It was also unclear whether claims management companies would "ramp up" their activities around PPI ahead of the deadline, which could also prompt more complaints, he said.
However, it was clear that the FOS would be continuing to deal with PPI "for some time", Thompson said.
"As I've said, people who think they've got a complaint have until 20 August 2019 to let the business know - though other time limits may apply, so it's best to act sooner rather than later," he said. "If people then have six months from the business' final response to contact us, that takes us into 2020 and beyond."
"Whilst firms will be happy that the PPI saga looks like it is coming to a close, the new rules and deadline have the potential to cause an operational and financial strain on firms," said Jonathan Cavill, a financial contentious regulatory expert at Pinsent Masons, the law firm behind Out-Law.com. "Firms will need to set aside greater reserves for both classic mis-selling complaints, which will likely accelerate in the run up to the deadline, but also CCA lenders will need to reserve for new undisclosed commission complaints."
The FOS would share some of its "early insight" into the impact of the new rules and the communications campaign in its next newsletter, which is due in the autumn, Thompson said. It also planned to update its website to reflect the changes, he said.