UK banks face the prospect of having to put more money aside to compensate customers for improperly sold loan insurance after the Financial Conduct Authority (FCA) proposed changes in the way claims are handled.
The FCA said earlier on Wednesday that customers who previously had a complaint about “regular premium” payment protection insurance (PPI) rejected, may be able to make a fresh complaint.
Consumers should consider whether to act before an August 29 deadline next year, the FCA said.
PPI has been the costliest scandal to affect UK banks since the financial crisis, with lenders paying almost £40bn in compensation to customers who were wrongly sold the coverage. The new guidance comes days after a court ruling on PPI that some lawyers said could add billions of pounds more to the total.
The FCA proposals should limit new liabilities to the “hundreds of millions,” according to analysts at Keefe, Bruyette & Woods in a note to clients. “The last thing the sector needs around PPI is any more uncertainty.”
The FCA declined to comment beyond the statement, but said the new guidance was unrelated to recent court cases.
KBW said in the note that CYBG and Lloyds Banking are the most at risk from additional liabilities. Lloyds, the UK’s biggest mortgage lender, has already set aside more than £18bn for redress.
“This consultation provides guidance on how to ensure fair and consistent outcomes for regular premium PPI complaints,” said Jonathan Davidson, executive director of supervision for retail at the FCA.
“It
supports our aim of bringing the PPI issue to an orderly conclusion in a way
that secures appropriate protection for consumers and enhances the integrity of
the UK financial system.”