The final surge – Unclaimed PPI and the case for contingency

Posted: 24th January 2019

30 weeks – that’s all the time left before new complaints about mis-sold PPI will be time-barred for good.

It seems like PPI has been with us forever at this point. The FCA’s nationwide TV, radio and social media campaign has brought knowledge of PPI into just about every household in the country, as have countless nuisance calls and automatically generated click-bait ads.

According to the FCA’s October update on their consumer communications campaign, we saw a “positive trend of increased awareness” about PPI, with 73% of people able to recognise the campaign (featuring Arnold Schwarzenegger’s robotic head on wheels) and over two million people having visited the FCA PPI website.

In the ten months of the campaign up until this report was released, eight and a half million enquiries were made and £3.7 billion in redress was paid to consumers – a 64% jump on the ten months before.

Another result of the campaign was that consumers were turned onto complaining directly to the firm that sold them PPI, rather than going through intermediaries such as claims management companies (CMCs). 55% of all complaints made have been made directly since the FCA’s communication campaign launched, a factor that will leave consumers tens of millions of pounds better off but also result in a flood of less-than-uniform complaints for firms to sift through, categorise, prioritise and action.

And yet, despite the breath-taking amount of redress paid out, even at this late date we have really only seen the tip of the iceberg.

As many as 64 million customers were sold PPI in the UK between 1990 and 2010. And, by our reckoning, only about 20 million of these cases have been handled, despite the campaigning and efforts of regulators, banks and CMCs. That’s a substantial amount of people who could be owed redress and countless hours of work for case handlers.

Now that we’re in the final stretch towards the PPI finish line, we can’t trip and fall at the last hurdle. Though it’s hard to change the typically human trait of ‘leaving things to the last minute’, we can prepare for the final surge in PPI complaints that panicked, last-minute claims may very well bring.
 

Will we see a surge?

Multiple factors play into the possibility of a surge, not the least of which is simple human nature. A much-cited study from Piers Steel of the University of Calgary (2007) found that 26% of the US population could be called ‘chronic procrastinators’, and that figure is rising all the time (in 1978, it was only about 5%).

As we all remain glued to our screens, rushing from one errand to another, working and manage ‘side-hustles’, it becomes harder and harder to find the time and energy to look through records for evidence of being sold PPI, let alone complain about it.

Making matters worse is that our nation’s famous ‘stiff upper lip’ often prevents us from complaining in general. FCA research suggests 15 million Brits routinely miss out on redress because they lack the confidence, know-how or drive to complain. Three quarters of consumers were found to avoid making complaints at all.

With the deadline finally approaching, who knows how many of these procrastinating, stoic consumers will finally get out their file of receipts and rush to make a complaint?

The regulator continues to push for new complainants to come forward. Jonathan Davidson, FCA executive director of supervision, said in 2018 that "we will carry on working hard to ensure every consumer has had the chance to make a decision on whether to complain about PPI”.

It’s obvious that the FCA will not rest until the very final minute of the PPI clock ticks down, the regulator having suggested in their 2018 report that they intend to bring the whole PPI issue to an “orderly conclusion” rather than let it drag on indefinitely.
 

How bad could it be?

It must also be remembered that the PPI deadline is only for new complaints, meaning that if hundreds of complaints are pushed into your firm’s figurative letter box even an hour before the ultimate deadline, they will all have to be processed and treated just as all previous PPI cases. This post-deadline surge could be extremely disruptive for firms that have wound-down their operational capacity in order to return to business-as-usual complaint levels.

The Financial Ombudsman Service (FOS) suggests that a surge is likely, but the scale is not yet clear. Currently, they have received fewer referred complaints than they had imagined for this time, but they do forecast a 7% increase in new complaints, having made a point of this in their budget for 2019 / 2020. The FOS says:

“While there’s considerable uncertainty about how many more PPI complaints might be made as the deadline approaches, we think it's sensible to make our plans based on a central assumption that we could receive 250,000 complaints in 2019 / 2020.”

The FOS outlines that PPI cases taken to the ombudsman sometimes see single redress payments totalling up to £9,000 (or more), so firms that believe that they still have outstanding cases to handle should be budgeting accordingly.

If there are still almost 44 million people left to claim, and each case could potentially cost several thousand pounds (including a fee to the ombudsman)… Well, you can do the math.

However, this is an absolute worst-case scenario and hardly worth imagining beyond making a business case for contingency funds and resource. Even if 7% of this 44 million-strong cohort submitted new complaints before August, however, firms could see their finances hit hard and resources strained in order to respond within the allowed eight-week time frame.

A sudden surge would also make it difficult for firms to respond effectively to other growing issues, including other large-scale complaints projects. The FOS has reported a year-on-year increase in complaints about payday lenders and instalment loan plans, for example. Not only will firms have to ensure they can handle late PPI complaints, but also the growing volume of business-as-usual complaints (up 10% between H2 2017 and H1 2018 within financial services) and other operational considerations (such as preparing for Brexit).
 

Keys to staying ahead

While the possibility of a surge remains up in the air, firms should be preparing contingency resource to help them manage any possible spike, while they also wind down to business-as-usual levels for the post-PPI period.

Firms might be served well in this by turning to trusted resourcing and outsourcing partners that could rapidly deploy additional, trained resource in the event of a surge. Not only will this allow the firm to manage the rising tide of general complaints, it will also save time, money and a great deal of effort that could be reinvested into planning for post-PPI steps.

As well as human resource, firms will also need to consider their technological resources – everything from connectivity to back-up and security.

Like you would during any business continuity planning, firms should be securing warm stand-by sites so that, should service levels begin to suffer during a surge, they will be able to rapidly invoke resource. It is never too late (nor too early) to work on securing contracts and stress testing third-party systems.

Finally, firms need to ensure a frictionless and positive customer experience, even past the deadline, for those filing PPI complaints.

2019 looks like a transformative and challenging year for operational teams. Phenomenal work has been done by firms to get this far. Now, more than ever, they need a game plan to get them to the final whistle.