Out-Law / Your Daily Need-To-Know

FCA publishes final guidance on 'Plevin' PPI complaints

Out-Law News | 09 Nov 2018 | 4:54 pm | 2 min. read

Firms could be required to re-contact consumers who made an unsuccessful complaint about payment protection insurance (PPI) and invite them to make a new complaint under new guidance by the Financial Conduct Authority (FCA).

The FCA has published new guidance clarifying its approach to complaints involving regular premium PPI, where the ongoing premium payments included an element of commission which was not disclosed. The new guidance requires firms to assess whether or not repeated commission payments were disclosed to the customer on an ongoing basis, and not merely at the point of sale; and whether customers should be compensated for this.

The regulator is in addition consulting on requiring firms to contact up to 150,000 people whose complaints were previously unsuccessful, telling them that they can make a new complaint and reminding them of the 29 August 2019 PPI complaints deadline. Firms would be required to assess these new complaints in line with the new guidance.

"The final guidance resolves an area of uncertainty and will ensure fair and consistent outcomes for regular premium PPI complaints," said Jonathan Davidson, FCA executive director of supervision for retail and authorisations. "The proposed mailings will help certain consumers who have previously complained about regular premium PPI but been rejected to engage with our campaign and consider whether they want to make a new complaint about undisclosed commission before the deadline."

The proposed mailing requirement is subject to a four-week consultation, which closes on 7 December 2018. If the FCA decides to proceed, firms will then have to complete the mailings by 29 April 2019, four months before the final complaint deadline.

The FCA published its first set of rules for handling disclosure of commission complaints around sales of regular premium PPI last year, in response to a 2014 Supreme Court decision on the relationship between PPI premiums and commission payments. That case, Plevin v Paragon Personal Finance, considered whether failure to disclose a large commission payment at point of sale made the transaction unfair under the 1974 Consumer Credit Act (CCA).

The regulator has now revised those rules to deal with an "uncertainty", which it said had led to some firms rejecting complaints involving undisclosed commission for restricted credit PPI sold before 6 April 2007 as being "outside the jurisdiction" of the complaint-handling rules. It is the FCA's view that the payment by the customer of commission on subsequent premium payments may amount to a "thing done (or not done) by, or on behalf of, the creditor, either before or after the making of the agreement", which may make the relationship unfair under the CCA.

"One of the most important upshots from this consultation paper is that it confirms that there can be jurisdiction for the FOS to consider non-disclosure of commission complaints in the Plevin context, even where the sale of the PPI occurred before 14 January 2005 – the date insurance intermediation activities became regulated – on the condition that the consumer credit relationship and non-disclosure continued beyond the CCA transitional period," said contentious financial services expert Jonathan Cavill of Pinsent Masons, the law firm behind Out-Law.com. "This confirms that the scope of the complaints handling rules in this regard is much wider than many firms previously considered."

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. As of last month, more than £30 billion had been paid out in redress to consumers, £3.7bn of which was paid since the start of the FCA's 'Make a Decision' consumer communications campaign in August 2017.