The deadline for making a claim for mis-sold payment protection insurance (PPI) is 23:59 today - Thursday, August 29, and thousands of people are expected to leave it right down to the wire to submit their claim.
While banks will hope that this will draw a line under a scandal that has cost them billions of pounds,those mis-sold PPI will hope that a last-minute application could reap thousands, perhaps enough for a holiday or a new car.
The Financial Conduct Authority, which has run a high-profile advertising campaign featuring the talking head of Arnold Schwarzenegger in the run-up to the deadline, says that a quarter of those who plan to make a claim on the last day will leave it until the last few hours.
How it Works
Savers can make a claim in a number of ways, directly or indirectly, and it’s easy to bypass the ubiquitous claims management companies, which will usually take a chunk of your refund payment as a fee.
If you know which company sold you the PPI in the first place, you can use their online tools to make a claim. Alternatively, you can use the FCA’s official PPI website to find a provider and you will then be directed to its online complaint tool. The regulator also has a dedicated call centre, which is open until 8pm on weekdays. However, it's worth bearing in mind that while the FCA can provide the information you need to make a claim, it cannot make one on your behalf or give you advice based on your individual circumstances.
You could also use the online tool provided by Which? – it asks simple questions such as date of birth, previous addresses, the name of the provider and type of financial product you took out (credit card, personal loan etc). The form is then sent to your provider, which will respond to you directly. The provider has eight weeks to respond to your claim and will usually contact you within eight to 10 days via post, email or phone.
What if the bank rejects your claim after the deadline? If the company rejects your claim – or doesn’t respond to you within the eight-week period – you can still appeal to the Financial Ombudsman Service (FoS) within six months of receiving the final response from the provider. For example, if the company sends you its final decision on October 1, you will have until March 31, 2020 to make a complaint against the decision.
PPI – A Brief History of a Long Saga
The first PPI compensation payments were made back in 2011 and peaked at around £700 million a month in 2012. Since then, compensation payments have been between £300 million and £400 million a month. The average payout received is £1,700 - the largest received was a hefty £142,000.
In March 2017 the final PPI deadline for claims was announced. Andrew Bailey, chief executive of the FCA said: "Putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off. We believe that two years is a reasonable time for consumers to decide whether they wish to make a complaint."
Rob James, co-manager of the Merian Financials Contingent Capital Fund and UK financials analyst at Merian Global Investors, says that while a PPI compensation payment is seen as “free money” for consumers, it has been very costly for the banks. According to the FCA, banks have paid out £36 billion so far to the end of June 2019. Lloyds Banking Group, which was bailed out by the taxpayer during the financial crisis, expects to pay out £20 billion in total.
The compensation has come directly from the banks’ capital, James says, which means that they lent less money to customers, and have paid lower dividends to their shareholders, including pension funds and charities. Still, James argues that “we are in the home straight” now, even though there’s a risk of a spike in last-minute applications.
