The FSA has finalised rules that will force companies selling payment protection insurance to improve their complaints handling processes, which could cost firms £3.2bn.
In a policy statement published today, the FSA has published new handbook guidance to ensure complaints are handled properly and appropriate redress is offered.
The FSA has also published an explanation of when and why firms should analyse their past complaints to identify if there are serious flaws in sales practices and an open letter setting out common sales failings to help firms identify bad practice.
The regulator says it expects firms to retain records of their root cause assessment of PPI sales problems and failings, their considerations and decisions about whether and what own initiative actions are required as a result and the scope, nature and results of the actions taken, including any dealings with individual consumers.
The FSA says it will draw on these records in the course of its monitoring work.
The FSA estimates that the cost of the new Handbook provisions to the industry over the next five years will be between £0.8bn and £1.3bn.
It estimates that the cost to the industry of the wider package of measures, mainly concerning firms’ actions to offer redress to consumers who have not complained, is between £1.1bn and £3.2bn.
Firms must implement the measures by December 1, 2010.
The FSA says it is also considering extending the time limit consumers have for referring a PPI complaint to the Financial Ombudsman Service following receipt of a firm’s final response letter.
FSA director of conduct risk Dan Waters says: “Today is the culmination of months of hard work and now, with these measures, we look forward to consumers being treated fairly whether they are buying or complaining about PPI.
“Since we took over the regulation of PPI we have carried out 24 investigations and three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans, visited over 200 firms and handed out some very significant fines. Now, with this package of measures we are confident we can mend a market that has been broken for too long.
“This remedy is fair to consumers and the industry alike. The onus is now on the industry to ensure it treats all customers fairly. We will be monitoring the implementation of our guidance closely to ensure real change is delivered.”
Which? chief executive Peter Vicary-Smith has called for an industry-wide review of past complaints relating to PPI sales.
He says: “For years, the industry has handled poorly thousands of PPI complaints so it is important that the FSA is able to force firms to review old cases.
“We want the Government to act swiftly and activate the FSA’s power to force lenders to review rejected PPI cases so consumers whose complaints were wrongly dismissed can get the redress they are due.”