PPI mis-selling – now the banks pay out
The banking industry has finally backed down on its legal fight over the mis-selling of payment protection insurance (PPI)
to millions of customers.
The British Bankers’ Association has lost its court challenge against the new mis-selling rules and will not appeal the decision. Now the big names in banking have set aside millions to pay compensation claims for mis-sold PPI
PPI is supposed to cover payments on loans if someone falls ill or loses their job – but many people have had PPI added to their loans who would not be eligible to claim the insurance
in those circumstances, such as self-employed people.
When the mis-selling scandal came to light, the banks were told by the City watchdog to re-examine all previous sales, even in cases where complaints had been rejected or not even lodged. Even during the legal case, many complaints were put on hold and will now have to be processed. There have been 16 million PPI policies sold since 2005 and many of these are thought to have been mis-sold.
Peter Vicary-Smith of the consumers’ association Which? said: "PPI was mis-sold and complaints about it mishandled on an industrial scale for well over a decade.
"There could still be huge numbers of people out there who were duped into buying PPI and unaware they can make a claim."
In fact, now that the banks are willing to pay compensation for mis-sold PPI
, it’s thought that several million people will be entitled to a compensation payment from Barclays, HSBC, RBS and the Lloyds Banking Group.
Adam Scorer, of Consumer Focus said the banks should ensure users received their money "quickly and efficiently".
"The entire episode is an embarrassment for our High Street banks - it is now time to wipe the slate clean, pay up and look to learn lessons for the future," he said.
"Refunding billions of pounds to millions of people will be a mammoth undertaking and to get it wrong would add insult to injury."
The Financial Services Authority
has previously estimated that the banks will have to pay up to £4.5bn to settle tens of thousands of claims – this now seems to be a large underestimate. The regulator requires the banks and other PPI sellers to look at all past sales and, if there is any evidence of "systemic" mis-selling, to write to the affected groups of customers and invite them to make a claim.
However, any customer who has a concern is encouraged to lodge a complaint first rather than wait for the bank to take the initiative.
Although the FSA can only enforce its rules on sales made after January 2005, when it took over regulation of PPI sales, customers can still complain to a bank about sales before then.