FSA vastly underestimated scope of PPI mis-selling
by Luke Whitmore, 17th May 2011
The compensation payouts for mis-sold PPI could reach £10
billion, some financial analysts have estimated.
The amount is more than double the initial calculation by the
Financial Services Authority, who expected mis-sold PPI reclaims to
reach around £4.2 billion.
It is only as the various high-street banks set aside funds for
compensating customers who were mis-sold policies that the true
scale of the PPI mis-selling debacle has become clear. The process
started with Lloyds TSB, who set aside £3.2 billion to refund to
customers after capitulating in the court case against the FSA.
Originally the intent had been to appeal against the court
decision, which put banks under obligation to pay out PPI
compensation to borrowers who had been mis-sold the product.
Lloyds' capitulation set the ball rolling for other banks to
likewise admit defeat and establish exactly how much they expect to
pay out over the coming months to customers to whom they have
mis-sold PPI policies, which has turned out to be vastly more than
the FSA had expected. £8 billion was a recently suggested figure,
but sources within the banking industry have suggested that they
may in fact end up totalling more than £10 billion.
PPI, or Payment Protection Insurance, is a type of insurance
often on offer when taking out loans, such as mortgages or credit
cards. The intent of this insurance is that, if the borrower should
undergo an unexpected loss of income, through, for example, the
loss of their job or a debilitating injury, their repayments on the
loan will be "protected" by payouts from the insurance.
Unfortunately, many banks came to rely on PPI as a huge source
of profit, resulting in policies being pushed onto many people who
did not want them, could not use them and who were sometimes not
even told that they were being sold this additional, optional
insurance.
If you have been mis-sold PPI, we can help you make a PPI
claim.
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"I just had to put pen to paper and write to say I'm more than delighted with my settlement that you won me back from my PPI I had with Lloyds TSB. The Claim Forms were simple to fill in. It was a breeze"
Mr R Evans 11 Nov 2010