[co-author: Charis Chung]
FCA publishes final guidance on regular premium PPI complaints and new consultation on mailing rules
On 7 November 2018, the FCA released a consultation paper (CP18/33) publishing final guidance clarifying its expectations about the handling of mis-selling complaints relating to regular premium PPI, and proposing new mailing rules requiring firms to write to previously rejected complainants.
CP18/33 follows the FCA’s July 2018 consultation paper (CP18/18) in which the FCA sought responses on whether firms should consider recurring non-disclosure of commissions or profit-share (“RND”) when assessing mis-selling complaints in relation to regular premium PPI policies. For further information on CP18/18, see this blog post from Hogan Lovells. See here for previous blog posts on PPI mis-selling and the impact of the Supreme Court decision in Plevin v Paragon Personal Finance Limited (“Plevin“) more generally.
Responses to CP18/18 and final guidance on PPI complaints involving RND
In CP 18/33, the FCA summarised and responded to feedback on the guidance in relation to RND proposed in CP18/18. Although some respondents disagreed with the FCA’s view of RND set out in CP18/18, the FCA has not changed its view. The guidance has now been published unchanged as final guidance in the FCA Handbook (DISP App 3) and in Annex B to Appendix 1 of CP18/33. Annex B also includes additional final guidance regarding how firms should assess complaints involving RND. Both the guidance and additional guidance came into effect on 8 November 2018.
One of the FCA’s proposals in CP18/18 that was of particular concern to firms was that firms should assess RND under the FCA’s general (non-PPI specific) complaint rules in DISP 1.4 instead of the FCA’s PPI-specific rules in DISP App 3.
Most responses to CP18/18 disagreed with the above approach. Firms expressed concern that an approach under the general complaint rules would provide insufficient details about how firms should assess RND, and suggested that the FCA should avoid inconsistent outcomes for consumers complaining about regular premium PPI policies as compared to those complaining about single premium PPI policies.
Despite firms’ concerns, the FCA has maintained the proposed approach to the assessment of RND complaints. To allay concerns about consistency of approach between assessments of complaints relating to regular versus single premium PPI policies, the FCA has published additional guidance in Annex B (the “Additional Guidance“). The Additional Guidance states that “In many cases it may be reasonable for firms to draw from our rules and guidance on non-disclosure of commission at point of sale“, and that “sensibly applied, this approach would tend to provide for fair outcomes in many complaints involving RND“.
The Additional Guidance introduces another element of uncertainty as to the required approach to assessment of RND: the FCA Handbook now states that firms should assess RND under the FCA’s general complaint rules in DISP 1.4, but at the same time the guidance in Annex B states that an assessment under the PPI-specific complaint rules in DISP App 3 would tend to provide for fair outcomes for complaints. The FCA has indicated that decisions of the Financial Ombudsman should inform complaints handling, and firms should monitor FOS decisions on RND-related complaints in order to confirm the principles for assessment of complaints. The FOS intends to start engaging with firms and issuing provisional views as soon as it has considered the final guidance published in CP18/33, which may help provide clarity to firms.
The FCA has confirmed that the August 2019 deadline applies to PPI complaints involving RND.
Consultation on new mailing rules for firms
The FCA has also published a new consultation in CP18/33 on new mailing rules requiring firms to write to certain categories of previously rejected PPI complainants. These rules will affect both firms which sold single premium PPI and those which sold regular premium PPI.
The proposed rules would require:
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Lenders to write to regular premium PPI complainants who had previously complained about non-disclosure of commission (i.e. Plevin) but whose complaints were rejected on the grounds that either (i) the case did not involve an unfair credit relationship or (ii) the case was out of jurisdiction. The letters have to inform these consumers that a new complaint may be made in light of RND, and the August 2019 deadline.
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Sellers (including brokers) to write to regular and single premium PPI complainants whose cases had been rejected as out of jurisdiction (these complainants had not been written to under previous Plevin mailing rules). The letters have to inform these consumers that they can make a new complaint to the lender about non-disclosure of commission (in light of RND or Plevin, as applicable), as well as the August 2019 deadline.
Where a firm is both seller and lender and knows that a consumer’s complaint under Plevin or in light of RND would not be in jurisdiction if made, or the firm has already offered or paid compensation to a PPI complainant for mis-selling or an unfair relationship, the rules do not require additional contact letter to be sent out to such consumers.
This consultation closes on 7 December 2018. The intended date for the new mailing rules to come into force is 28 January 2019. The FCA intends that firms would complete the mailings as soon as practicable and no later than three months after this date.
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