Outlook: Payment-protection insurance (PPI) mis-selling is rapidly becoming yet another albatross round the neck of our leading banks. The order by the Financial Services Authority (FSA) that lenders should look again at 185,000 complaints about PPI mis-selling previously turned down is a pretty damning verdict on the way in which customers have been treated.
The FSA says 60 per cent of complaints by consumers about PPI are rejected by the companies that sold them the policies, though the figure rises to almost 100 per cent at some lenders. Remarkably, of those complainants who then take their cases to the independent Financial Ombudsman Service, 80 per cent get the lender's decision overturned.
The FSA is most concerned about single-premium policies sold next to unsecured loans, where it has told many lenders to review all their sales going back to July 2007 at least. That may be just the start: consumer groups are still pushing for probes into insurance sold alongside mortgages and credit cards.
What's remarkable is that the banks just never seemed to realise PPI was under scrutiny, despite the 22 enforcement cases concerning the cover that the FSA has brought against lenders. While light-touch regulation no doubt missed many of the worst abuses as the PPI market developed, the more heavy-handed approach taken by regulators over the past two years doesn't seem to have had much of an effect either.
The good news for consumers is that from next October, lenders won't be able to sell PPI alongside loans or mortgages, which should encourage people to look for a better deal elsewhere. Identifying mis-selling cases and compensating the victims may take much longer.