FSA extends PPI consultation in further delay for consumers

The FSA will extend its consultation on planned Payment Protection Insurance (PPI) market reforms by six weeks, further delaying fair treatment for customers says an independent consumer panel.

Consultation paper CP10/06 states while consumer groups were very supportive of the FSA's plans in the previous paper, CP 09/23, PPI providers and industry groups were "highly critical" of proposals.

The Financial Services Consumer Panel (FSCP) says republishing the plans as a result of industry pressure will further delay fair treatment for consumers in this area.

Chairman of the panel Adam Phillips says: "The industry seems determined to fight against the FSA introducing new rules and guidance which would ensure consumers receive a fairer outcome if they make a complaint."

Most industry responses argued the FSA previously failed to show there was a genuine problem around PPI sales and complaint handling, proposed "not appropriate or proportionate" solutions to PPI, and underestimated the costs of solving complaints.

Dan Waters, the FSA's director of conduct risk, says: "We're disappointed the industry has responded so critically to our proposals but we remain 100% committed to bringing about genuine, lasting change in the PPI market."

But Phillips says: "The FSA will now wait for clarification of its powers under the current Financial Services Bill - which is not guaranteed to be passed in this Parliament - before deciding how to get fair treatment for consumers who have had past PPI complaints rejected."

He adds: "However, this is no reason for the FSA to back off, and we are pleased that the tone of the announcement today indicates the FSA is not planning to do so. Consumers need tough action from the FSA."

Last January, the Competition Commission banned the sale of PPI alongside loans and credit cards from 2010. Lenders must now wait seven days before they can offer a customer the insurance.

In September, the FSA announced a package of what it called "tough measures" to protect consumers in the PPI market. Firms representing more than 40% of face-to-face sales in the Single Premium Unsecured Personal Loan PPI market agreed to review these sales and redress those consumers identified as mis-sold.

The FSA invites further comments on its proposals, and responses must be received by 22 April 2010.