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Wheatley: FSA’s PPI failure allowed CMCs to become ‘new industry cancer’

Martin Wheatley

Financial Conduct Authority chief executive designate Martin Wheatley admits the regulator’s failure to levy substantial fines on firms for misselling payment protection insurance has contributed to claims management firms becoming the “new industry cancer”.

Speaking at an Association of British Insurers conference on conduct regulation in London this morning, Wheatley (pictured) said he analysed how the FSA responded to the escalating problem of PPI misselling while it was happening, and said although the FSA spotted the problem early on it met a lot of resistance from the industry in trying to address it.

He said a lot of detailed work and file reviews were carried out before the FSA got to the point where it could start levying fines for PPI misselling.

Wheatley said: “Where we failed is we did not realise the proportionality of the fines we were implementing against the profitability of the product. We did not look through to the business model of the firm. One or two directors have said subsequently to me and those at the FSA at the time, the FSA should have known firms would not respond to £100,000 fines, as they were making billions from this market. It was a huge revenue driver.”

He added PPI accounted for more than 30 per cent of some banks’ total retail profits.

Wheatley said: “The industry is now unpicking that at huge cost, a cost of billions to the industry and a cost to all of us who are bombarded every day with claims management companies saying ‘you too may have been missold’.

“We have created this problem for the industry, that because it was not dealt with earlier, because the industry did not respond to our signals, it has become a huge problem. We have created this new cancer on the industry which is the claims management companies who are driving lots of claims which are not necessarily valid.”

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  • matt 21st September 2012 at 11:50 am

    In the last month I have received 2 complaints from CMC’s. In each case I had never even spoken to the claimants, one of the “claims” was from before I even started trading.
    CMC’s need to face financial penalties themselves for their shoddy practices. Ambulance chasing cowboys is the only printable description I have for these people. The lowest of the low.

  • TDD 20th September 2012 at 11:57 am

    I think we can figure out who owns/works for a CMC cant we Anonymous

  • Robert Martin 19th September 2012 at 4:46 pm

    Mr Wheatley is talking total crap and just trying to make a name for himself in his new executive chair !

    See The Times article 15/8. After all banks bitching about CMCs, and how they are going to put the consumer right, nearly 25% of all claims sent to the FOS rejected by banks for allegedly not having PPI actually “DO” have PPI.

    If it wasn’t for CMC’s the banks would have brushed this one away like all the other scandals, and only paid out a small fraction of what they owe the public.

    Point your finger somewhere else Mr Wheatley.

  • Chris Gardner 19th September 2012 at 2:57 pm

    Anonymous | 19 Sep 2012 9:34 am

    no its not. Its simply that PPPi firms are scum.

  • D 19th September 2012 at 9:34 am

    So its nothing to do with the banks not writing to all custommers as agreed and declining most cases that come in direct. If the banks as agreed had written to PPI clients and redressed those that were mis-sold there would be no claims management firms in this area.