The PPI claim scandal ravaging the financial world is not going to go away quietly. Banks have been jockeying for a deadline to claims in hopes of cutting loose from their future commitment owed following a rash of mis-sold payment protection insurance. However, their attempts to get a deadline placed on these PPI claims has once again been shot down by the Financial Conduct Authority, albeit not expressly, but banks’ hope for a deadline to be placed nevertheless seems futile.
Banks snubbed over PPI Claims Deadline
Talks have been ongoing between various banks involved and the FCA for some time now. The £20bn PPI mis-selling scandal has been the focal point of many banks’ fiscal years, and they’re trying to prevent this from extending any further. Most banking organizations have battened themselves down to more-easily weather the storm. For instance, Lloyds Banking Group has set aside £10bn to cover the impending loss of incoming claims. However, it has recently been indicated that these talks have been entirely broken off. The FCA has politely indicated that they have no intention of agreeing to any kind of agreement regarding deadlines. It is a painful blow to the budget of a number of large banks; while it will not doom them in the long-term, it will cut into statutory profits for some time to come.
It’s open knowledge that the talks have ended. Reports as to the reason have been somewhat quieter, and the source that leaked the circumstances as following an FCA snub has only been identified as “close to Lloyds.” With political tensions as high as they are, no one of any rank in banking is going to come out critical of the FCA without numbers to back it up. As a result, trying to predict where this situation will go next is difficult: no one in the know has the position to speak to it.
Without a deadline, the ongoing consequences are monumental. Lloyd’s has calculated that, taking into account the present rate of claims they are receiving, they will be forced to process more than 550,000 over time if no deadline is placed. This is accounting for a slow decline in the rate of claims over time. The processing of each claim alone takes a huge resource outlay even if the claim isn’t valid, making this no small matter for banks to face. All-told, the top four banks in Britain are going to see claims in the millions before this is allowed to end.
The resources required to process claims have led to concern from some that this will be used as an opportunity to submit fraudulent claims. These claims would not be for profit, but simply in hopes of inconveniencing the banks as a form of protest. With so many claims being filed over time, adding to the tide with relative anonymity would be a very simple matter for a determined-enough, industrious protestor of the banking system. If certain anti-banking organizations do successfully organize such a protest, they could collectively add upwards of another half-million claims to the queue.
The FCA has gone on record explaining that the primary issue with a deadline is payout. John Griffith-Jones, FCA chairman, said, “If you can quickly ensure everyone gets their money and gets it quickly, it would be churlish for us to say no. But that is a high hurdle.” Simply put, a poorly-orchestrated deadline could leave many with valid PPI claims left out in the cold. With the top four banks having the ability to outlay the collective £20bn they stand to be accountable for, they have had difficulty demonstrating the need for a deadline or any overall benefit to the financial world, save the preservation of funds from claims they would not be honoring.
The FCA may be bowing to pressure from consumer groups, however, many of which have come out as vehemently opposed to the idea of a deadline.
All of this comes on the heels of Lloyds posting their first statutory profit since 2010, leading many to wonder just how badly they really need a deadline to insulate themselves against losses. “If they can pay their bonuses this year,” one anonymous commenter has argued, “Why can’t they pay the money they’re accountable for?”
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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim
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