By Trevor Clawson

As many cinemagoers will testify, Arnie gets the job done. So when the Financial Conduct Authority announced that Arnold Schwarzenegger was to be the face of a £42m advertising campaign to encourage consumers to claim compensation for mis-sold Payment Protection Insurance (PPI), it seemed that the regulator was aiming for maximum impact.

And the decision put Arnie centre screen seems to have worked. By now most people have probably at least caught a glimpse of the robotic head of Schwarzenegger, mounted on tank tracks, urging consumers to “make a decision” and “do it now” before it is “bye-byes for the PPI.”

Commissioned by the FCA and paid for by the very companies that will ultimately be paying out on PPI claims, the ads were a little edgier than most,  but figures released this month by the regulator suggest that the campaign has triggered a reaction.

Up until the end of the December 2017, PPI payouts totalled almost £37bn. In December alone, payouts amounted to £337m,  reflecting a rising trend towards the end of the year. The Regulator speculated that this could have been due to the Arnie effect.

Sudden Impact

The latest figures from the FCA suggest that since the campaign launched in August, more than 800,000 people have visited its website, generating more than 2 million page views. In addition, the Authority has handled 16,700  PPI related calls and 2,700 webchats.

And an independent survey by the consumer organisation, Which also suggests that the Arnie ads were having at least some effect on consumer behaviour.  In a poll of 995 people who made claims using a Which tool, 49% said they had been motivated to take action by media coverage, with one in ten directly citing the FCA campaign.

Banks have also seen a considerable increase in inquiries since the campaign was launched. For instance, Lloyds Bank, as reported by the BBC, said it is handling around 16,000 calls a week since the launch of the campaign, compared to the previous average of 11,000.

The Deadline Approaches

The campaign was considered necessary because of a deadline of August 29, 2017, imposed by the FCA.  After that date, it will no longer be possible to lodge a PPI complaint and claim compensation. The aim of the ads, then, was to shake potential claimants out of a state of perhaps understandable lethargy by reminding them that even if chasing down the necessary documents and contacting the bank in question is something that can easily be kicked into the long grass, the window for securing a repayment is finite.

“Putting in place a deadline and campaign will mean people who were potentially mis-sold PPI will be prompted to take action rather than put it off. We believe that two years is a reasonable time for consumers to decide whether they wish to make a complaint,” said Andrew Bailey, FCA Chief Executive.

With the FCA estimating that as few as one in five potential claimants have approached their bank over PPI there are clearly many people who have yet to act.

Should You be Listening to Arnie?

According to the FCA, around 64 million PPI policies were sold to consumers between 1990 and 2010.

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Should you be listening to Arnie?

Ostensibly, they were intended to ensure that in the event of unemployment or illness, policyholders would see the insurance company cover the cost of repayments. They were, in other words, pitched as a safety net.

But In practice, many of the policies were mis-sold, either because they offered little or no value to those who purchased them,  or because the bank or card company pressed the consumer too hard to include PPI as part of the loan package.

For instance, policies were sold to self-employed and unemployed borrowers, even though the insurance would not pay out to those people. Similarly, some policies excluded people with certain pre-existing medical conditions and yet they were sold, by bank staff, to people who declared those conditions. In other cases, policies were sold to borrowers who were above the age limit.

But the definition of mis-selling goes much wider. Banks and other lenders who pressured consumers or suggested they wouldn’t get the loan unless they took cover are liable to make repay premiums. In some cases, policyholders weren’t even told they had cover.  

The Commission Game Changer

There are no guarantees when it comes to claiming PPI, The Which Survey – published in January – found that just 23% of those who applied has their claims uphold.

But a recent legal action has changed the rules of the game. Following a ruling by the Supreme Court, if a bank took more than 50% of the payable premium in commission without disclosing it, compensation may be due.The case was brought by Susan Pleven. Having been turned down for compensation, she lodged another complaint on the grounds that commission paid to the bank hadn’t been disclosed. The court found in her favour. This opens the door for a new wave of claims based on commission arrangements alone.

Equally important, anyone who has had a PPI claim previously rejected can make a second claim relating directly to the commission.

But there is a catch. PPI compensation is decided according to the cost of the policy itself and not the commission. Thus if a lender took a commission of 50%, then the compensation payment received could be no more than half the amount originally paid.

However, anyone who has had a claim turned down by a bank can also make an appeal for the whole amount.

“If you’ve had a complaint turned down by a bank and you disagree with the decision, you should take this up with the Financial Ombudsman Service,” said Gareth Shaw, a Money Expert at Which.

The Final Countdown

The PPI scandal may be entering its final countdown phase – indeed, the purpose of the 2019 deadline is to draw a line under the whole affair – but the pain isn’t over for High Street banks.

Bracing themselves for the expected impact of the FCA ad campaign, the big banks put aside a further £1.5bn to cover the cost of payouts in the middle of last year.  For instance, Barclays added £700m to its fund, as did Lloyds while HSBC pumped in another £228m.

To date, Barclays, Lloyds, and HSBC have put aside a total of £9.3bn, £18bn and 3,6bn respectively, while RBS and Santander have set aside £4.9bn and £1.5bn each, according to Which research.

Despite the uptick and payments and a healthy increase in inquiries via FCA helplines and its website, the chances are that a lot of eligible consumers have yet to make a claim and some may not choose to do so, deterred by the prospect of tracking down paperwork that may date back as far as the 1990s (the banks won’t do it for you) or working with claims management companies. These companies typically work on a no-win/no-fee basis and will do a lot of the legwork – including establishing if an individual is eligible to claim – but they can charge between 15% and 30% of any payout.

Most advisers say making your own claim is preferable. So now is the time to act.