More PPI Pain for UK High Street Banks

MORE PPI PAIN FOR UK HIGH STREET BANKS

FRESH FINES TO FOLLOW A FINAL WAVE OF COMPLAINTS

Ahead of the payment protection insurance (PPI) complaints deadline on August 29th 2019, banks face the threat of fresh fines from the City regulator if they fail to cope with a flood of new payment protection insurance (PPI) claims.

The Financial Conduct Authority (FCA) has sparked more approaches from consumers by setting a deadline of August 2019 for compensation claims. Also, it has ordered banks to review old claims in light of a landmark Supreme Court decision in 2014.

An analysis of over 1.25 million complaints, carried out across seven firms with high street operations in the United Kingdom, shows that the deadline has sparked more approaches from consumers. Specific firms also appear to be more susceptible to financial penalties and restitution following this race to the PPI finish line.

LEADING BANK SEES PPI COMPLAINTS INCREASE BY 50%

A leading UK high street bank saw the number of PPI complaints increase by 50% between H2 2017 and H1 2018. Should this trend continue, this firm will exceed a 100% increase in complaints before the deadline. This is the tipping point for regulatory activity.

Another leading UK high street bank saw the number of complaints increase by 28% between H2 2017 and H1 2019 (to date). This firm has already seen a huge volume of complaints made against it and it may now be on track for another round of regulatory penalties.

The remaining two leading UK high street banks are also seeing an increase in the numbers of complaints, though at lower percentage increases.

Of the global organisations analysed, a major US firm that operates a retail bank in the UK has seen a 900% increase in complaints. This is despite the number of complaints being traditionally low for this firm. A leading European firm with retail operations in the UK also saw a 10% increase in complaints.

While most PPI complaints occurred before 2015, there are a number of firms that might be worried about this final wave. Corlytics’ data shows that, once a firm experiences more than a 100% increase in complaints on a specific topic to the ombudsman, enforcement activity and restitution becomes inevitable. Regulatory penalties will be unavoidable.

COMPLAINTS CORRELATE WITH A PATTERN OF ENFORCEMENT

The data illustrates that firms face the threat of fresh fines if they fail to adequately address this flood of new PPI claims. When a 100% increase in complaints is logged with the UK Financial Ombudsman, a pattern of enforcement becomes imminent.

The graph below shows a surge of complaints in H1 2013, followed by a spike in enforcement and restitution activity in H1 2015:

By setting this deadline for compensation claims, the Financial Conduct Authority (FCA) has sparked more approaches from consumers. Banks need to take note that, for specific types of complaints, the restitution outweighs the enforcement amounts that are levied by the regulators. They are taking restitution very seriously, making sure consumers are fully compensated. The banks in question need to provision capital or face a major shock down the line.