On 5 March 2014 a breakfast meeting was held to discuss the fallout from the PPI mis-selling scandal and the lessons to be learned.
Yvonne Fovargue MP chaired the meeting, inviting panellists to respond to a new report from Citizens Advice on claims management companies and the costs of redress.
Adrian Harvey, head of consumer policy at Citizens Advice, outlined the report’s findings, saying the banks’ sluggish approach to compensation had allowed claims firms to proliferate. This has left consumers £5 billion out of pocket. Mr Harvey said claims firms should be banned from cold calling and urged banks to design proactive redress strategies to ensure that claiming directly is the consumer’s instinctive response.
Tony Boorman, interim chief executive at the Financial Ombudsman, agreed that the financial services industry failed to properly respond to evidence of mis-selling as it emerged. The Ombudsman has been deluged with an unprecedented level of consumer complaints about PPI, most often adjudicating against the banks.
Cosmo Gibson, redress policy manager at the Financial Conduct Authority (FCA), acknowledged that regulators had taken too long to respond to the PPI scandal in the first instance. However, the FCA has worked with the industry and says sales practices are now starting to improve – although the regulator remains vigilant.
Dr Stefan Hunt, from the chief economist’s department at the FCA, said banks should apply the insights of behavioural economics to increase the number of consumers who bring complaints to them directly. This would squeeze claims firms who to date have successfully exploited this space. Thanks to recent reforms, the FCA is now better equipped to deal with similar problems in the future; however, Dr Hunt wants banks to adopt a more automatic approach to providing redress.
Kevin Rousell, head of the Claims Management Regulation Unit, said his job was not to force claims firms out of existence; however, progress is being made to rein in their conduct. He agreed more needed to be done to tackle the issue of nuisance calls and announced the regulator is to consult on new powers to impose financial penalties on firms guilty of misconduct.