Payment Protection Insurance – plans to combat mis-sold PPI are delayed
Following a massive rise in complaints about mis-sold Payment Protection Insurance (PPI), the Financial Services Authority (FSA) has been forced to extend its consultation on the matter by another 6 weeks.
This delay in ensuring that consumers receive fair treatment has been brought about by the financial industry itself putting pressure upon the FSA.
Payment Protection Insurance is sold with the promise of helping consumers to pay off loans should they become ill or lose their jobs. Yet many people have been mis-sold PPI, either because they did not need it or would be excluded in any case from making a Payment Protection Insurance claim.
PPI sales are very lucrative for the lenders and insurance brokers behind them, but back in September 2009 the FSA announced its intention to deliver a thorough overhaul of the rules on selling PPI. Crucially, it also wanted to take lenders and insurance brokers to task on their handling of past mis-sold PPI.
The plans have been put on hold due to complaints from the financial sector that it would have to pay out far more than first thought in compensation for mis-sold Payment Protection Insurance.
This includes people who have not yet complained about mis-sold PPI and it is thought that compensation claims could cost financial institutions up to £3billion.
When the new rules do come into force, the FSA expects up to half a million new compensation claims for mis-sold PPI. And this enforced delay of the consultation period has not gone down well with the FSA's consumer panel; its chairman Adam Phillips said:
"For too long firms have been letting down their PPI customers by not handling their complaints fairly."
"Now the industry seems determined to fight against the FSA introducing new rules and guidance which would ensure consumers receive a fairer outcome if they make a complaint."
Consumer groups have long regarded the selling of PPI as a 'protection racket' and The Competition Commission last year proposed that sellers should be banned from selling PPI at the same time as selling a loan. Useful links