Banks face having to reopen up to 2.5 million payment protection insurance mis-selling complaints after the City regulator, the Financial Conduct Authority, said it had concerns about the way in which customers were treated.
The FCA acted after a sharp decline in the number of complaints being upheld by banks in 2012 and 2013. The regulator is concerned that the banks may have been dismissing PPI compensation claims prematurely and without paying proper compensation.
Martin Wheatley, the chief executive of the FCA, said: “Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where it’s due, is an important step in rebuilding trust in financial institutions. In around two and a half million complaints this was not necessarily the case, so, at our request, firms will be looking at these complaints again.”
In total, an estimated £16bn has been paid out since 2011, although the compensation figure has been declining, with many observers assuming that this has reflected a tailing off in the number of cases. Instead, it seems that banks may have been taking a tougher stance.
Since PPI cases started to be logged by the regulator in 2007, the “uphold rate” – the percentage of cases where the customer is deemed to be in the right – has been 70 per cent; in 2012, this number started to edge lower towards 60 per cent.
Banking insiders have suggested that this decrease has been due to a decline in the quality of claims. “Some ambulance-chasing law firms and individuals were trying it on, so we were getting claims from people who didn’t even have a loan with us,” one banking source, who wished to remain anonymous, told The Independent.
But it seems the regulator disagrees with this analysis and wants the industry to revisit up to 2.5 million cases. Even where the customer complaint has been upheld, the FCA is concerned that the compensation may have been inadequate.
Reopening such a large number of cases will cost banks millions of pounds, with the likes of the partially state- owned Lloyds facing the biggest hit as it has the largest number of historic PPI mis-selling claims.
“This is a kick in the teeth for the banks, who must have thought they were beginning to see light at the end of tunnel when it came to PPI mis-selling,” said Andrew Hagger at the advice site Moneycomms.
“Banks are putting aside some £400m a month to meet PPI claims ... with so many cases now back in play, we are likely to see a rise in this provision once again.
“Ultimately, this will be passed on to shareholders and to customers through higher bank charges.”Reuse content