The FCA’s final guidance on PPI claims means banks could have to reopen thousands of rejected cases.

New regulations from the FCA promise to open the floodgates for a renewed surge of complaints. Meanwhile the FCA has also announced that an animatronic head of Arnold Schwarzenegger has lead to an increase in the amount reclaimed.

The FCA has updated its position on claims made as a result of high commission charges. This all relates back to the Plevin case, heard at the Supreme Court last year, and it could indeed be a game-changer. That’s because, if anyone has had PPI on a banking product since 2008, there’s a very good chance that they should be owed PPI.

Game changing

Previously, a bank will have had to have actually mis-sold the product to the client – such as claiming it was compulsory or lying about the costs. However, now they may also have to pay the money back if they received high levels of commission.

Typically, these commission rates were extremely high and would cover the bulk of the cost of the loan from the bank’s perspective. On average commission rates were north of 60% which is important because, under the Plevin ruling, if a bank charged commission of more than 50% and didn’t tell the customer it may now be forced to make the repayment.

Until now the FCA had not given clear guidance on whether policy makers who may have inadvertently paid commission on an ongoing basis would be entitled to a refund. The FCA’s clarification confirms that firms should consider complaints not only when commission was paid at the point of sale, but also when it was paid in ongoing installments.

This means banks may have to go back through old cases and review them and, if it appears that PPI has been mis-sold, get in touch. Individuals will not have to wait for a letter but can launch a complaint themselves.

Robotic Arnie

The announcement comes at the same time as the FCA revealed its public awareness campaign in which an animatronic head of the Terminator himself, informed the public of the deadline for making PPI claims has helped consumers to secure more than £3.7bn being repaid to 3.7million complainants – an increase of more than 60% from the ten months before the campaign.

The adverts, said the FCA had helped raise awareness about people’s rights and keep them out of the clutches of the claims management firms. Those firms have also come under the microscope as they capped the fees being charged by claims management firms at 20% plus VAT. Businesses will have to go through the FCA authorisation process in order to manage claims.

It has, then, been a busy month or so on the PPI front. The upshot of all this is that banks will have to invest time and money looking into claims which had been rejected and taking action where claimants may now have the ability to make a claim.