One of the most curious and controversial aspects of recent mis-selling scandals, including Payment Protection Insurance (PPI) and the more recent issue of Card Protection and Identity Protection policies, is that the redress schemes have been placed in the hands of the very companies that mis-sold the policies in the first place.
For many critics, it will come as no surprise that the PPI redress scheme has now been criticised by the new financial services industry regulator, the Financial Conduct Authority.
In particular, the FCA carried out a review of medium-sized firms’ PPI complaints handling, spanning smaller banks, personal loan companies, credit card providers and building societies, which together account for about 16% of all PPI complaints, or around one million affected customers.
They have so far paid out £1.1 billion in a scandal that has seen almost £12 billion paid out across the financial services industry; but despite the level of payouts, the complaints handling processes in place at many of these medium-sized firms must improve, according to the FCA.
Director of supervision Clive Adamson says: “We expect firms to deliver fair outcomes to PPI complainants. In our review, we found that some firms are doing this, while it is clear others still have some way to go.”
Among the six firms who were deemed to be “generally delivering fair outcomes”, the FCA still disagreed with up to 8% of rejected claims, and up to 21% of the financial redress offers made to complainants whose applications were upheld – figures that might not sound acceptable to those involved.
But of even greater concern were the remaining 12 firms, where the FCA disagreed with as much as 60% of rejected claims and 43% of redress offers made.
The sample size was relatively small – the FCA examined just 10 upheld claims and 40 rejected complaints from each firm – but the high percentage rate across the board will be seen as many critics as an indication that allowing financial services providers to handle the redress schemes for their own mis-selling scandals is a bad idea.
With the Card Protection and Identity Protection redress scheme still to come – and currently expected to operate on a similar basis – there could still be a sting in the tail for a large proportion of complainants and redress claimants in the months and years to come.