MoJ issues PPI guidance for claims management companies after Plevin
The Financial Conduct Authority (FCA) consulted in 2015, and again in 2016, on a package of measures including proposed new rules and guidance on handling Payment Protection Insurance (PPI) complaints in light of the Supreme Court’s decision in Plevin v Paragon Personal Finance Limited (Plevin). In the Plevin case, the Supreme Court ruled that a failure to disclose to a client a large commission payment on a single premium PPI policy made the relationship between a lender and the borrower unfair under section 140A of the Consumer Credit Act 1974.
In March 2017, the FCA announced final rules and guidance on handling PPI complaints. These will come into effect on 29 August 2017. Prior to commencement, we want to ensure that CMCs understand the rules and expectations in handling cases relating to Plevin.
2. Clarity and transparency in marketing and communications with clients
The FCA are requiring firms that have sold PPI to write to previously rejected mis-selling complainants who are eligible to complain again in light of Plevin, in order to explain this to them. It would be deemed unfair and misleading for you to omit this information in marketing or communications with clients. When a client is deciding whether to instruct a CMC to represent them in making a Plevin related complaint, they should be able to make a fully informed choice based on the information you have provided. You should also ensure that you don’t mislead clients about the likely level of redress they may receive and explain clearly how this will be calculated. Misleading clients or omitting to provide information is a breach of the Conduct of Authorised Persons Rules (CAPR) and potentially other consumer protection regulations.
3. Obtaining instructions and using information already held
You should ensure that you have sought clients’ instructions to act on their behalf in relation to the complaint on Plevin grounds. You are likely to require a new Letter of Authority from your client if you have not previously raised Plevin grounds, the complaint was rejected more than six months ago, and it has not already been referred to the Financial Ombudsman Service. You must ensure that you have the appropriate consent to contact the client before doing so. (Further information is available on consent in our Marketing and Advertising Guidance. When presenting the complaint on the basis of Plevin grounds, you will be expected to use and include relevant information you and/or your client has already been provided with to assist the lender in investigating the complaint.
4. Eligible Plevin cases
Not all complaints will be considered or re-considered on Plevin grounds. Where redress has already been paid on the basis that the client would not have bought PPI but for the sales failings, then the lender does not have to consider or pay redress to the client if a further complaint is made about undisclosed commission. If the complaint was submitted after late 2015, the lender should have told you/your client that it will consider the commission it earned as part of the complaint. You have an obligation to act responsibly and take all reasonable steps to investigate the existence and merits of (each element of) the claim and substantiate the basis of the claim. You must therefore have processes in place to ensure that the complaint is eligible before presenting it to the lender.
5. Referring complaints to the Financial Ombudsman Service
If your client is unhappy with the way the financial business has answered their complaint on Plevin grounds, then you’ll need to think carefully about whether you should refer this to the Financial Ombudsman Service. The Financial Conduct Authority’s rules state that if the consumer has already received full redress from the business they won’t be due anything further, so you’ll need to check this with your client first.
Before referring complaints to the Financial Ombudsman Service, you should work with the financial business to understand how it reached its answer, so you can properly advise your client about their options.
If your client does decide to refer a complaint to the Financial Ombudsman Service, it will expect clear reasons why your client is unhappy with what the business has said and you should provide evidence where necessary to support this.