The PPI remediation guidelines that have been issued by the FSA will be impossible for UK insurers and other financial institutions to achieve without significant, rapid investment, Charter UK reported on Tuesday.
Payment Protection Insurance compensation has already proved a significant problem for the sector, having to cough up over £1 billion in payouts in 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 the FSA’s rigid deadlines for remediating and managing existing PPI complaints.”
If the FSA decides to stick to the guidelines in their current form, the industry is almost certainly going to fail to meet the requirements, Charter warned.
Paul Clark, CEO of Charter UK said, “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.