The FSA has published proposed guidance for firms that sold payment protection insurance (PPI) and are beginning to contact customers who may have been mis-sold a policy but have yet to complain.
The guidance outlines steps firms should take when writing to these customers. It stresses the importance of these communications explaining clearly why the customer may have been mis-sold and could be entitled to redress, what the customer should do to respond to the firm, the time limits involved and the need to act promptly.
The letters are part of a process being undertaken by PPI firms to establish what caused the large number of complaints this is called ‘root cause analysis’. When an FSA authorised firm identifies recurring or systemic problems in its sales processes it is required to correct them. The firm should consider what action it may need to take to treat fairly affected customers that have not complained – including contacting them and giving them the opportunity to claim redress.
The FSA is also asking firms to ensure these letters are free from financial jargon or marketing material. The guidance consultation stresses the importance of keeping records of any response from the customer and the subsequent actions taken by the firm.
s well as providing guidance on the content of the customer contact letters, the FSA is also clarifying when and how firms might decide that a complaint is ‘time barred’.
Normally, customers have six years from a sale to complain or, if later, three years from when they became aware (or ought to have become aware) that they had cause for complaint. When a complaint is made outside this limit, the firm is no longer obliged to consider it and can reject it the Financial Ombudsman Service may also dismiss a complaint made outside these time limits.
With firms beginning to send letters to customers, the FSA is acting now to ensure these letters are easy to understand, contain clear notice of a potential mis-sale, and the time limits involved.
Martin Wheatley, FSA managing director, said: “This is important guidance and marks a key moment in the story of PPI. So far the majority of payouts have been for complaints received before