PPI mis-sellers fork out £215m in compensation

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The Independent Online

Firms that mis-sold hundreds of thousands of payment protection insurance (PPI) policies paid a total of £215m in compensation to consumers in the first half of 2011, according to the Financial Services Authority (FSA).

But at least one major provider may still miss today's deadline for settling complaints. Payouts by 16 major financial services companies totalled £102m in May and June alone, after a legal challenge by the British Bankers' Association against the decision that forced providers to compensate victims was dismissed.

Payments are made to consumers who have successfully complained about being sold PPI alongside loans or credit cards since January 2005 without the product being adequately explained, having been led to believe the cover was compulsory or without realising they had bought it, including in cases where a policy was unsuitable or the individual was ineligible.

Margaret Cole, the interim managing director of the FSA's conduct business unit, said: "The treatment of PPI complainants has left an indelible stain on the financial industry's record. By releasing these figures we're providing a useful measure of firms' progress that can be tracked on an ongoing basis."

The Financial Ombudsman Service has received more than 250,000 PPI mis-selling complaints to date, including a record 104,597 in the last financial year, and has upheld about 75 per cent. Providers have set aside about £7.4bn to cover the cost of redress, which typically involves refunding payments made for PPI plus backdated annual interest at 8 per cent – an average payout of £2,700 per claim.

However, backlogs in complaints handling could mean providers miss today's FSA deadline for settling claims by failing to provide customers with exact offers in time. Barclays and Lloyds expect to have sent letters to all their claimants outlining compensation decisions by today, although many will still not receive payments for several weeks.

But HSBC said that it will have communicated the final redress amount to all customers with an upheld complaint by the end of this week, rather than by today's deadline, and that the FSA was supportive of its approach.