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The UK’s competition regulator has ordered Royal Bank of Scotland and Santander to appoint an independent body to audit their PPI processes after they failed to tell thousands of customers about their policies.
The Competition and Markets Authority (CMA), led by former Conservative MP Andrew Tyrie, said RBS and Santander failed to provide required accurate reminders of their payment protection insurance (PPI) policies to 11,000 and 3,400 customers respectively. The failures took place over six and five years respectively.
The PPI scandal, in which banks systematically missold insurance to customers with little likelihood of it ever being used, has been a millstone around the necks of the banks. New City Agenda, a think tank, calculates that the bill for the British banking sector has reached £48.5bn – and it could breach £50bn.
The banks were meant to send customers an annual reminder from their PPI provider that clearly sets out how much they’ve paid for their policy, the type of cover they have, and reminds them of their right to cancel. RBS failed to send reminders, and will have to refund customers another £1.5m, while Santander sent inaccurate information.
Adam Land, a senior director at the CMA, said:
It is unacceptable that some banks aren’t providing PPI reminders – or are sending inaccurate ones – eight years after our order came into force. The legally binding directions we’ve issued today will make sure that both RBS and Santander now play by the rules.
These are serious issues that, in the future, may result in fines if the government gives us the powers we’ve asked for.
For now, we expect RBS to repay all affected customers quickly, and for both RBS and Santander to make sure that similar breaches do not happen again.
The final deadline for new PPI claims is 29 August, with the Financial Conduct Authority, the City regulator, currently carrying out an Arnold Schwarzenegger-themed advertising campaign – yes, really – to remind people to claim.
It is yet another reputational blow to the banks in the scandal which will not die.
Meanwhile, in Jackson Hole…
We’re well into sleepy August on the economic data front, with no really notable releases. Those economists who aren’t on the beach (and probably some who are, given its importance this year) will be tuning into coverage of Jackson Hole, the annual central bankers’ holiday retreat in the Wyoming countryside.
Who would take the job of Jerome Powell right now? Every Federal Reserve chair has to put up with their fair share of brickbats, but nobody for the best part of a century has had to take such furious criticism from the White House.
Powell will have a chance to hit back later today – or at least to lay out his reasons for resisting Trump’s calls to cut rates to stimulate the economy. He speaks at the central bankers’ summer retreat in Jackson Hole, hosted by the Kansas City Fed, at 3pm BST. You can see the full schedule here – Bank of England governor Mark Carney is due to speak at 8pm BST.
But what to expect? After Powell delivered the first rate cut in a decade at the start of the month, investors are looking for signs of more to come as fears around a recession rise. On bond markets the US two-year/10-year yield curve inverted again yesterday, flashing another warning sign over the world’s largest economy.
China’s renminbi hit its lowest point in more than 11 years against the US dollar in early trading, but currency moves have mostly been muted as traders await Powell’s comments.