Consumers will have until June 2019 to claim compensation for payment protection insurance (PPI) mis-selling under plans outlined by the Financial Conduct Authority (FCA). It had originally proposed a spring 2018 cut-off for claims.
Shares in banking groups slumped into the red as the new deadline is set to escalate the total bill for the PPI scandal, which has already been the costliest yet for the financial services industry at well over £30 billion.
One banking expert warned the extended deadline could see each bank put by hundreds of millions of pounds more to cover claims.
Lloyds Banking Group – by far the worst affected by the PPI scandal – said it was “disappointed” that the deadline will not come into effect until June 2019.
But it stressed its rate of complaints were falling rapidly and said it would not increase money set aside for PPI “at this stage”, with £2bn of unused provisions.
Shares in Royal Bank of Scotland and Barclays dropped 3 per cent, while Lloyds was 2 per cent lower.
The FCA confirmed plans to launch a marketing campaign from next June, which will be funded by Britain’s banks, to raise awareness of the 2019 deadline for claims to be submitted.
It admitted the deadline is later than first expected and later than a number of banks wanted.
But it said it gives time to prepare the marketing campaign and get plans in place for the deadline.
FCA chief executive Andrew Bailey said he hopes the cut-off will draw a line under the scandal.
“Putting a deadline on PPI complaints will bring the issue to an orderly conclusion in a way that protects both consumers and market integrity,” he said.
He added: “We will ensure that our communications campaign will engage with all those who could be affected, particularly vulnerable consumers.”
It will consider further feedback on its proposals for the deadline until 11 October.
Gary Greenwood, Shore Capital’s banking analyst, said banks had made their provisions to cover claims until mid-2018, which may see extra provisions of “a few hundred million pounds and perhaps as high as £1bn”.
PPI is still the most complained-about financial product, with recent figures from the Financial Ombudsman Service (FOS) revealing that as many as 4,000 complaints are received every week.
The FOS said it received 188,712 new PPI cases in 2015-16, making up just over half of its workload in the last financial year. About one in five PPI cases are resolved within three months.