THE fallout from the Payment Protection Insurance mis-selling scandal is going to drag on well into next year with the regulator warning banks are struggling to process the “very large” volumes of outstanding claims.
The Financial Conduct Authority said that while banks have huge PPI processing operations in place a number had said they might not resolve some complaints until next summer.
PPI costs soar for Scottish lenders after last minute surge in claims
The FCA has previously made clear it expects banks to resolve the bulk of complaints within eight weeks or explain why they need more time to settle them.
The regulator highlighted the impact of its decision to impose a deadline of August 29 for the submission of claims.
“We are aware that the volume of PPI checking enquiries and complaints sent to firms increased significantly during August 2019 in the run-up to the complaints deadline,” it said.
“As a result, firms will not be able to meet their normal complaint handling times.”
The volume of complaints leaves consumers facing a long wait for any compensation they may be entitled to with the FCA holding out little prospect it could speed things up.
Clydesdale bank owner's value falls by £430m as PPI bites
“We are challenging firms to deal with these complaints as quickly as is reasonable, given the very large volumes,” said the authority.
“It will take time for some consumers to receive their response but it is important to us that these complaints are handled fairly and accurately.”
The FCA declined to provide details of which banks had said they would not be able to resolve complaints until next summer.
It tried to provide some reassurance for people affected noting they will be entitled to receive interest, “typically eight per cent”, on any compensation awarded based on the time taken to respond.
However, the update may raise fresh questions about the FCA’s decision to impose a deadline of August 29 for the submission of claims.
The FCA imposed the deadline in 2017 saying it wanted to prompt people into deciding whether to check if they had PPI and wanted to make a complaint.
Banks had called for the FCA to bring an end to a saga which has rumbled on for years, causing them reputational damage in the process.
Bank of Scotland owner takes £1.8bn PPI hit
The FCA introduced rules for complaining about PPI in 2011.
Banks have paid out a total of more than £43 billion compensation to date.
PPI was commonly attached to loans, mortgages, credit cards or store cards.
Last month Clydesdale Bank owner CYBG said it had received an unprecedented volume of PPI Information Requests during August and a sustained increase in complaints. The number of complaints averaged 5,000 per week during the first four weeks in August and 22,000 in the final three days.
The group, which also owns Yorkshire Bank, estimated the associated costs would total up to £450m.
CYBG had provided a total of £2.67bn for PPI claims and associated administration costs as at the end of the first half on March 31.
Royal Bank of Scotland said it expected to provide up to a further £900 million in respect of PPI claims in its third quarter results. It noted: “The volume of claims received during August was significantly higher than expected.”
The Edinburgh-based giant had provided a total of £5.3 billion in respect of PPI claims to the end of the first half on June 30.
Bank of Scotland owner Lloyds said a higher than expected surge in PPI information requests before the August 29 deadline had led it to set aside up to a further £1.8 billion to deal with the scandal.That lifted the total amount Lloyds Banking Group has provided for PPI claims to nearly £22bn.
The PPI claims programme has been described as a form of quantitative easing for consumers.The FCA says the average payout has been worth around £1,700.
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