PPI payout deadline considered by regulator

The average pay-out for PPI claims is more than £3,000

The financial regulator, the Financial Conduct Authority (FCA) is considering a deadline for claims over mis-sold payment protection insurance (PPI).

It anticipates that PPI customers would still have at least until 2018 to claim compensation.

So far more than £20bn has been paid out for PPI mis-selling to more than 10m consumers.

The policies were supposed to protect people against loss of income or sickness, but were often inappropriate.

The regulator will now launch a consultation, on whether there should be a deadline on compensation claims.

It said there should be a window of at least two years after the deadline is set.

This would not be before the Spring of 2016 - meaning that consumers would have until the Spring of 2018 to make a claim through their bank or the Financial Ombudsman.

Shares in Lloyds, the bank most exposed to PPI, jumped by nearly 3% in early trading.

It has set aside £13.5bn to cover claims.

The banking industry welcomed the announcement, saying it provided further clarity for consumers.

Analysis: Kamal Ahmed, Business Editor

A very small sigh of relief this morning from Britain's biggest banks following the decision of the Financial Conduct Authority to consult on a final deadline for Payment Protection Insurance claims.

Banks such as Lloyds have long argued privately that there should be a cut-off point. They are convinced that many of the claims are bogus and are driven by claims management firms rather than by irritated customers.

Of course, many say that the banks are rightly reaping the effects of their appalling past behaviour.

The FCA move today is all about the "normalisation" of relations between regulators and the City.

As George Osborne signalled in his Mansion House speech earlier this year, the government is keen to see a new "settlement" with the financial services sector.

The former, combative head of the FCA, Martin Wheatley, was removed by the Treasury.

And the PPI deadline means another thorny legacy issue looks close to being dealt with.

Advertising campaign

The number of complaints about PPI is falling, but still runs in to hundreds of thousands every month.

In the first half of 2015 more than 883,000 customers complained about mis-selling, a fall of 16.6% on the same period in 2014.

The FCA said a deadline would "bring the PPI issue to an orderly conclusion, reducing uncertainty for firms about long-term PPI liabilities and helping rebuild public trust in the retail financial sector."

The watchdog said too many people were taking too long to bring their claims, and that a deadline - along with an advertising campaign promoting any potential deadlines - would spur any outstanding claims to be brought.

Some people will have an even shorter time in which to complain.

Three years ago, the regulator ordered banks to write to as many as 12m customers, advising them they may have a valid complaint.

Those who received such letters were given a deadline of three years in which to submit their claims, meaning some may have already lost their right to complain.

What should consumers do now?

• Consumers who want to complain should do so as soon as possible

• In the first instance, complaints should be directed to the bank that sold the policy

• If customers do not receive a satisfactory response from their bank, they should take it up with the Financial Ombudsman Service

• Consumers do not need to use a claims management company to help them, advises the FCA, as such complaints are free

The consumer group Which? warned that any deadline could encourage banks to hold up compensation payments.

"A time limit must not reward those that have dragged their heels over paying out compensation," said Richard Lloyd, Which? executive director.