Which? has warned the Financial Conduct Authority (FCA) that putting a time limit on claiming compensation for mis-sold Payment Protection Insurance (PPI) could lead to an increase in nuisance calls.
The product and service reviewer said that the FCA’s plans to introduce a 2018 deadline for PPI claims was “ill-judged”.
It said that a two-year time limit for PPI complaints would set a dangerous precedent and force Claims Management Companies (CMCs) to push as hard as possible to attract people to claim through them. It would also result in banks having little incentive to pay out compensation swiftly and directly to consumers in any future mis-selling scandals.
Which? said that nearly a third of all complaints made to banks about PPI are being brought by CMCs on behalf of consumers, who charge a fee of up to a third of the compensation offered.
Which? executive director Richard Lloyd, said that the watchdog had to rethink its proposals.
“If banks and other PPI providers had been more proactive, then this whole process would have cost less and driven fewer people to use CMCs,” he said.
“The regulator should instead bring forward new proposals so that banks make it more straightforward for people to make a claim without a costly CMC and get back all the money they are rightly owed. We also need to see tougher regulation of CMCs put in place without delay, otherwise nuisance calls will increase as they try to cash in on the regulator’s plans.”
In 2015, over £3bn was paid out in PPI compensation, and the big five banks have now set aside more than £32bn for payments.
Before the FCA goes ahead with any proposals for a time limit, Which? wants it to create a simpler process for making a claim, with banks required to accept complaints electronically and tighter regulation of CMCs.