Jeff Salway: Watchdog rolls over for banks shamed by PPI

Lloyds led criticism of the deadline. Photograph: Carl Court/Getty

In bowing to their wishes by proposing a deadline for PPI complaints, the Financial Conduct Authority (FCA) is putting them out of their misery after more than a decade of abject failure.

The regulator is getting off the hook too, looking forward to the day in June 2019 when it can wash its hands of a debacle that neither the FCA or its predecessor, the FSA, ever got to grips with.

By the time the deadline comes around it will have been 14 years since the regulator first acted on the rampant PPI mis-selling that financial journalists had been reporting for some time.

PPI providers were warned in late 2005 to sort out their sales practices or face action. After several court cases, the mis-selling eventually ceased, only to be replaced by a scandal that was perhaps even more emblematic of the rotten culture of the banks.

Having finally stopped selling PPI policies to people who weren’t eligible for them, or charging customers for policies they hadn’t even taken out, the banks focused their energies on denying them compensation.

Millions of people with valid claims were told to go away, the banks knowing that only a minority would then go to the Financial Ombudsman Service. The FOS found in favour of the complainant in the vast majority of cases yet, even after several hefty fines, some banks still refuse to do the right thing by their customers. It’s believed that for all the billions paid out in compensation, at least half of those mis-sold PPI have yet to claim for compensation.

Banks have been playing for time and they’ve now been rewarded. The proposed rules justify their avoidance tactics, allowing them to simply launch a “marketing campaign” to raise awareness of available compensation.

Yet the banks, led by Lloyds, now have the nerve to gripe about the timing of the deadline. The FCA noted that industry responses to its consultation were largely supportive of a cut-off point, which consumer bodies had argued against. A small handful of consumer groups against the full weight of an industry of banks and lobby groups, who have been pushing the FCA and the government hard on this issue, was only ever going to produce one outcome.

The regulator will impose the deadline even though it must realise that this falls short of its duty to protect consumers.

Equally worrying are some of the proposed rules. Consumer groups argued that the deadline shouldn’t apply to complaints about claims that were rejected because the customer was ineligible to claim, or because of a policy exclusion. That would leave some vulnerable consumers in even deeper hardship and potentially at risk of losing their homes, but the appeal fell on deaf ears.

This was because allowing complaints after the deadline would “undermine the effectiveness and logic of the deadline”. That’s not a reason, it’s a pathetic excuse.

But what would you expect? The banks pretend they’ve reformed their culture since the financial crisis. You only need to look at the PPI scandal, from the mis-selling to the complaints handling to their refusal even now to accept responsibility, to know how empty that claim is.

It won’t improve now, even with the deadline nearly three years away. After all, you might as well finish it the way you started.