PPI - The never-ending story?

The PPI scandal
The PPI scandal

The PPI scandal, which has cost billions and dragged on for years, is still causing headaches. The latest FCA data on complaints from customers to financial services firms showed a six per cent rise in complaints between July and December 2015 and the product continues to come top of the list of the most complained about of banking services.

In February a National Audit Office study looking at the industry’s effectiveness in dealing with the mis-selling scandal found that the industry’s regulators lacked good evidence on whether their actions are reducing overall levels of mis-selling.

It found that overall, banks’ handling of complaints had been poor, requiring ongoing action from the regulators. And it said that many consumers who have been mis-sold financial products fail to receive full compensation because of lack of awareness or reliance on claims management companies.

But could there be light at the end of the tunnel? A way for banks to move to the future on a more stable platform, no longer having to set aside billions on their balance sheets to meet future pay outs?

There have recently been calls for a time limit to be set for claims to draw a line under the whole debacle, however this is by no means set in stone. Should such a limit be imposed, it’s not simply a case of the banks waiting for the deadline to pass and heaving a sign of relief. There will need to be sustained collaboration between both competitors and regulators to resolve the affair in a way that will not only satisfy customers, but could go some way to helping the battered reputation of this beleaguered industry.

So, if a timeline was to be imposed, what should happen next?

Fair play by the banks and strong oversight by the regulators: It’s time for the banks to stop dragging their heels in compensating customers. They should act fairly and pay out first time on legitimate claims. They should also seek, or be encouraged to move to, a form of final proportionate settlement for all consumers who have likely been mis-sold PPI and have not yet claimed. The regulators, where PPI is concerned, should further distance themselves from the industry and be given stronger powers, backing and support to deal with misdemeanors from both the banks and claims management companies

Effective regulator led, industry-funded campaigns to raise consumer awareness: Industry wants this problem to go away and consumers are frustrated, confused and mistrusting of many organisations and their PPI complaints processes. A national campaign, funded by the banks who caused the mis-selling scandal and the claims management companies who have profited, should be led by the regulators who are impartial and trusted in consumer eyes. The campaign would need to span multiple channels, such as TV, radio, direct mail, online and social media, to ensure no stone is left unturned

The ticking clock: “You snooze you lose,” should be the cornerstone of the kill PPI campaign. Urgency coupled with mechanisms that incentivise organisations and people to act will motivate the uninformed and the stragglers. Banks who play ball should be incentivised with reduced annual FCA fees and punished with fines and continued naming and shaming. Consumers should be encouraged through the prospect of a deadline and punished, through not reaping compensation that they may be entitled to, if they fail to claim within the deadline

The scale of the challenge should not be underestimated. Bringing this scandal to a close will require a strong and concerted effort from both the regulators and financial services firms. An honest and well-coordinated campaign will kill PPI dead.