Britain’s financial regulator is to impose a two-year deadline for customers to claim compensation for mis-sold loan insurance, drawing a line under Britain’s costliest consumer finance scandal.
Banks have already set aside more than 28 billion pounds($42.41 billion) to compensate customers for mis-sold payment protection insurance (PPI) policies. These were supposed to protect borrowers in the event of sickness or unemployment but were often sold to people who would have been ineligible to claim.
The Financial Conduct Authority (FCA) said on Friday it planned to introduce the deadline for consumers to claim they were mis-sold payment protection policies, or lose their right to have them assessed.
“We take the view that a deadline would help bring finality and certainty in a way that advances the FCA’s operational objectives of securing an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system,” the regulator said.
The watchdog said it aimed to issue a consultation by the end of the year, and set the deadline two years from the rules coming into force. The new rules would not come in before spring 2016, so consumers will have until at least spring 2018 to complain, it said.
The FCA said that sales of loan insurance fell dramatically after early 2009 and the current rules and guidance about making a complaint have been in place since December 2010.
More than 20 billion pounds in redress has been paid to over 10 million consumers so far, it said.
The regulator said the time limit would also apply to complaints in light of a landmark ruling last year by the Supreme Court.
The watchdog will consult on rules and guidance about how firms should handle PPI complaints in light of the so-called Plevin judgement by the Supreme Court.
The court found that Paragon Personal Finance breached the Consumer Credit Act by failing to tell a customer the charge for their policy included a big commission paid to Paragon and a broker.
If the ruling was applied to all PPI claims, banks may need to pay out billions of pounds more in compensation.