We chart the multibillion-pound PPI scandal and the delayed FSCS review
Brokers are hoping that next year’s review of the FSA’s controversial compensation scheme will free them from the cost of payment protection insurance (PPI)-related payouts.
But a refund of levies already paid by brokers is not on the cards. For three years, brokers have been hit by increases in levies for the Financial Services Compensation Scheme (FSCS) over PPI policies sold mainly by credit brokers.
“The review isn’t going to make any difference. The FSCS won’t admit the mistake, because if it does, and says: ‘you shouldn’t have been charged this’, then we’ll want our money back,” Ten Insurance Network business development director James Sharp says. The next best outcome for GI brokers is that they are decoupled from credit brokers for FSCS levies.
Cobra Network compliance director Mark Peasey says: “We want the FSCS and the FSA to understand and recognise that we’re a sector independent from other areas of the insurance industry with which we’re lumped together. We have our own characteristics and our own risk profile, which is far lower than the banks and credit brokers.”
Biba has led the calls for a review of the FSCS, but it is not seeking refunds. Biba head of compliance and training Steve White says: “There’s no talk from Biba of retrospective refunds of levies. This is about getting the model changed for the future. We think we have good solid grounds for change, and that’s what we will be arguing for.”
A review of the FSCS, delayed by the FSA insistence that it must wait for publication of the EU’s Insurance Guarantee Directive, is due to go ahead in the first half of 2012.
View from the broker
“We feel very badly about the fact that we’ve never sold payment protection insurance. Nobody we’ve ever known has sold PPI policies. There are only a handful of insurance brokers in the country that do. It’s like sweet shop owners being lumped in with drug dealers. Let’s say you want to make cannabis or cocaine legal and regulated, which is effectively what they did. Then you lump in sweet shops owners with drug dealers on the basis that cocaine, well, that’s like cocoa beans, and cocoa beans make chocolate. Our invoices now carry a £2 FSA fee. And it’ll become £2.50. Eventually we’ll have to differentiate between different classes of business. Maybe it’ll become five quid or 10 quid for certain classes of business. So who are we charging now? The consumer - which is a bit unfair because none of them bought PPI insurance either.”
Ten Insurance Network business development director James Sharp
Who’s who in the FSCS review
Steve White, head of compliance and training, Biba
With over 30 years in the insurance industry, White is the mastermind behind Biba’s drive to lobby the FSA and the government to
re-assess the structure of the Financial Services Compensation Scheme and to fast-track the review, which is now set to take place next year.
Mark Neale CBE, chief executive, FSCS
The former Director General at HM Treasury responsible for budget, tax and welfare
between 2005 and 2010, Neale joined the Financial Services Compensation Scheme in May 2010.
Natalie Ceeney CBE, chief executive, Financial Ombudsman Service
The Financial Ombudsman Service handles more than a million phone calls from disgruntled consumers with financial problems each year. Ceeney joined the FOS in March 2010 during a surge in complaints generated in part by PPI mis-selling.