3rd August 2016
The financial watchdog the Financial Conduct Authority (FCA) has extended the sunset clause on PPI compensation claims until June 2019.
The FCA run a consumer awareness campaign in the run up to the date.
Andrew Bailey, chief executive of the FCA said: “Putting a deadline on PPI complaints will bring the issue to an orderly conclusion in a way that protects both consumers and market integrity.
“We have listened to all the feedback we have received and believe that the steps we are taking are the right ones. We will ensure that our communications campaign will engage with all those who could be affected, particularly vulnerable consumers.”
Since 2011, £24.2 billion has been paid out by banks in compensation to customers, providing a not inconsiderable boost to consumer spending power over that period.
Laith Khalaf, senior analyst, Hargreaves Lansdown said: “PPI mis-selling is at the top of a sorry list of crimes and misdemeanours which have dogged the banking industry for the last decade.
“The disappearance of PPI into the rear-view mirror removes a major thorn in the side of the UK banking sector, which has significantly dented reported profits over the years. Lloyds has been at the forefront of the barrage of complaints, having put aside £16 billion since 2011 to cover compensation claims.
“The introduction of a deadline, combined with a public awareness campaign, is likely to lead to a spike in claims in the short term. Banks have already raised their PPI provisions in anticipation of the remaining wave of claims, though they may have to make adjustments if these prove to be insufficient.
“Clearly the PPI deadline is overall a positive development for the banks involved, though they were probably hoping the FCA would pull the drawbridge up in 2018 as originally planned.”
“Litigation and conduct costs remain a key risk for the banking sector, not least for Royal Bank of Scotland which is still bracing for the impact of a litany of US legal proceedings against the bank, for mis-selling mortgage-backed securities in the run up to the financial crisis.”