Mis-sold PPI scandal sees banks pay out billions

Customers still dissatisfied over complaint handling

by Russell Shackleford, 7th September 2011

Months after a court decision on the mis-selling of PPI by the banks, controversy still rages over this much-maligned form of loan insurance.

PPI, or Payment Protection Insurance, has been a bone of contention between independent regulators and the banks for some time, after it was found that many borrowers had been offered, and in many cases agreed to taking out, a PPI policy, even when it was not suited to their needs and in many cases was not something they were actually able to claim on.

In the worst case scenarios, customers simply had the additional fees for the insurance tacked on to their loan without having it explained that they were paying extra to have their loan "protected" or that it was an optional addition which they did not have to take.

The Financial Services Authority introduced new rules to prevent PPI mis-selling in recent months, but the banks were dismayed when it was revealed that this new legislation would require them to seek out customers who had been mis-sold PPI and offer compensation.

The banks initiated a judicial review on the matter, insisting that it was not fair that these new rules were to be applied retroactively, but common sense won out and the banks were declared the losers in a court decision, meaning that mis-sold PPI would soon be a thing of the past.

Still, many individuals have struggled to reclaim mis-sold PPI, with the banks attempting to hide behind loopholes and legal jargon. Nonetheless, it is now the case that many of those who were victims of Payment Protection Insurance mis-selling are seeing payouts totalling thousands of pounds in a form of redress for the unnecessary insurance policies they were made to pay for. The banks have set aside billions of pounds for this, giving some idea of the extent of the mis-selling scandal.