FSA tells banks to alert borrowers of mis-sold PPI
Payment Protection Insurance scandal not over yet
by Luke Whitmore, 6th March 2012
The Financial Services Authority (FSA) has demanded that banks send out letters to those who took out Payment Protection Insurance policies, alerting them that their policy may have been mis-sold.
Payment Protection Insurance, more commonly known as PPI, is a form of loan coverage which is intended to ensure that a borrower won't fall behind on their repayments if they should suffer a sudden loss of income, due to, for example, the loss of a job or an unforeseen illness.
However, the policies were sold to millions of customers who would never have been able to claim on them. The reasons an individual might find themselves exempt from the policy are numerous, but the upshot is that a vast number of bank customers have found themselves paying for a Payment Protection Insurance policy that is utterly useless to them.
The banks have already had to pay out billions of pounds in compensation, but this new edict by the FSA could lead to the distribution of up to 12 million more letters, with a potential 2 million PPI reclaims from customers on the horizon. This is likely to end up costing financial institutions around £3bn, on top of the vast sums of compensation they have already had to pay out.
The Financial Ombudsman Service (FOS), who act as a middleman between financial institutions and disgruntled consumers, are planning to hire a thousand additional staff to process all of the PPI claims they expect to deal with as a result of this latest initiative. The banks will often resist borrowers' efforts to claim back the money they are owed, which often ends with the FOS being forced to step in on behalf of the consumer.
The PPI scandal has cost the banks billions so far, and is evidently showing no signs of slowing down.
If you have been a victim of PPI mis-selling, you could make a mis-sold PPI claim through Claims Financial.