Banks will probably have to pay out more in payment protection insurance after the financial regulator said it was pushing ahead with rules forcing lenders to write to 150,000 customers who have already had previous claims rejected.
The Financial Conduct Authority said on Friday it would launch a month-long consultation on the rules, which will make lenders inform customers that they can make new compensation claims on mis-sold PPI. They must make a claim by August, when the deadline for all PPI claims comes into place.
The FCA’s rules aim to clarify uncertainty that has persisted since a key PPI ruling known as Plevin, which said that customers deserved compensation if they had not been told that a substantial part of their premiums were commission paid to the banks that sold the policy.
The FCA said that lenders must assess disclosures not only at that point of sale but on an ongoing basis.
The result will probably add to banks’ bills for PPI, which has become the costliest mis-selling scandal for UK lenders. So far, more than £30bn has been paid out in compensation. The average payout stands at £2,750.
“The final guidance resolves an area of uncertainty and will ensure fair and consistent outcomes for regular premium PPI complaints.” said Jonathan Davidson, the FCA’s executive director of retail supervision. “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.”