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FSA guidance for banks on PPI is ‘not achievable’
Financial institutions will struggle to meet requirements as regulator has underestimated cost and time required.
The guidelines released by the Financial Services Authority for remediation of mis-sold payment protection insurance do not “look achieveable”, according to software provider Charter UK has argued.
According to the company, which specialises in complaint and feedback management software, UK banks and other financial services organisations will not be able to meet PPI remediation guidelines without “significant, rapid investment in systems and processes”.
This is due to FSA underestimation of the processes and resources needed by organisations to comply with the regulation.
In partnership with the Office of Fair Trading, the FSA guidance document focused on two types of income protection: short term income replacement and non-insurance forms of protection such as debt waiver and debt freeze.
The regulator’s guidance forces firms to look at all previous PPI complaints they have received to identify any systematic failings in their sales procedure. Any consumers that may have been affected by these failings must be contacted and offered redress, even if they haven’t complained.
Paul Clark, chief executive officer at Charter UK, said: “Most banks and other financial services organisations are in the midst of pilot PPI remediation projects in order to evaluate the scale of the task facing them.
“Early reports from the industry suggest that the cost of implementing these remediation programmes is likely to extend far beyond the budget and available resources that have been set aside to handle the compensations themselves.”
He adds that the three to eight week window the FSA has set “does not look achievable”.
Not only are financial institutions facing difficulty meeting FSA requirements, but some believe the scandal will lead to a dearth of people taking out PPI even when they genuinely need it.
Roger Humber, director at UK debt waiver specialist Protection Products, worries that the number of borrowers with no form of payment protection will increase, and with it the number of accounts falling into arrears.
