Banks write to customers about mis-sold PPI
Millions of consumers will shortly receive letters from their banks explaining that they might have been mis-sold payment protection insurance
The Financial Services Authority (FSA) has instructed banks that the letters must be clearly written and free of jargon
. The watchdog has also defined the letters' content, which should include details of any time limits for making a complaint
The FSA said sending the letters was a "key moment" in the mis-sold PPI scandal
. PPI was intended to repay loans if customers' income dropped due to illness or redundancy. However, hundreds of thousands of people were mis-sold the policies.
The FSA expects banks to write from 4 to 12 million letters to customers who might have been affected. To claim compensation customers will have to answer the letters.
In 2011 some £1.9bn was paid to victims of mis-sold PPI by banks, which according to the FSA are now assessing how to deal with customers who had been mis-sold PPI but have not complained.
Martin Wheatley, the FSA managing director, thought that the redress due from this process could exceed what has been paid so far.
"That is why we are acting now to clarify our expectations," said Mr Wheatley. "By ensuring that firms are clear about the problems they have identified and the potential redress due, we are aiming to prevent people running out of time if they choose to complain."
The FSA said that most deadlines included a 6-year period from the date of sale
. However, customers must put in a claim within 3 years of when they were made aware
, or ought to have been aware, that they had cause to complain.
"Historically, response rates for these types of exercises are sometimes as low as 1 in 10," said Mr Wheatley. "If you receive a letter, it is important to consider your PPI purchase carefully and if you feel you have been a victim of poor practice then please do respond."
The consumer affairs group MoneySavingExpert noted that not everyone who has been mis-sold PPI will receive a letter and there are many more individual cases.
"Providers only need write to those who have been 'systemically mis-sold'. Check through all loans, credit cards and store cards you have had in the last 10 years to see if this insurance was added to it."
The British Bankers' Association (BBA) and the Association of Finance Brokers (AFB), which represent banks and lenders, said letters were being sent out to customers in stages.
"The agreed aim is to make letters more accessible and readily understandable for customers," said a spokesman for both bodies.
"The industry wishes to ensure that the exercise is effective and will endeavour to handle responses from customers promptly."