07 Feb, 2012
FSA’s guidelines for PPI remediation are impossible to achieve, warn experts at Charter UK
Charter UK, the leading specialist provider of enterprise complaint and feedback management software, has today warned that UK banks and other financial services organisations will be unable to achieve the PPI remediation guidelines that have been issued by the FSA without significant, rapid investment in systems and processes. Payment protection insurance (PPI) compensation has already been a serious financial problem for firms in the sector, which collectively have paid out over £1 billion in payouts over the past year.
The main problem, according to Charter UK, is that the FSA has completely underestimated the processes and resources that banks and other financial services organisations will need to implement in order to comply with the FSA’s rigid deadlines for remediating and managing existing PPI complaints. If the FSA decides to stick doggedly to the guidelines in their current form, the industry is almost certainly going to fail to meet the requirements.
Paul Clark, CEO of Charter UK (pictured) 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 has been set aside to handle the compensations themselves. In addition, the three-to-eight week window that the FSA has allocated to resolve a complaint does not look achievable without major investment in systems and process improvements.
“For these reasons, we believe that the FSA guidelines in their current format are nigh-on difficult for the industry to achieve. If the guidelines are not reviewed, financial institutions need to urgently review the systems they have in place to deal with this problem. Those firms that have invested in dedicated complaints handling technology solutions are in a much better position to cope than those relying on legacy systems and processes – but we are going to see some epic failures across the industry if the guidelines are maintained in their current state.”
The FSA’s guidance on ‘root cause analysis’ currently obligates firms to look at all previous PPI complaints they’ve received in order to identify any systematic failings in their sales procedures and complaints handling. At this stage, any consumers that may have been affected by these failings will need to be contacted and offered redress for any losses – even if they haven’t actually complained.
Huge numbers of PPI claims are already overwhelming the banks and other financial companies, with a growing number of frustrated customers now taking their cases to the Financial Ombudsman Service (FOS). As a result, PPI complaints currently make up more than half of the FOS’s total workload.