PPI mis-selling victims in line for compensation
Consumers who have been mis-sold loan insurance could be in line for a payout after a judge ruled against UK banks in a landmark case.
The British Bankers' Association had called for a judicial review after the industry regulator, the Financial Services Authority, decided banks should compensate anyone who was previously mis-sold payment protection insurance.
What is PPI?
Payment protection insurance is taken out to cover repayments of loans should you fall ill or find yourself out of work.
Banks have already paid compensation to thousands of people who contacted them to complain about mis-selling.
But last year the FSA published guidelines stating banks should contact all past PPI customers and give them the option to complain if they thought they had been mis-sold PPI. Banks disagreed with this and launched the judicial review.
However, the High Court ruled against the banks, meaning billions of pounds could now be paid out. Andrew Hagger, spokesperson for Moneynet, suggests this could cost banks between £2 billion and £3 billion, while some reports claim it could be as much as £4.5 billion.
The BBA says it is disappointed with the result but is considering appealing. It has 21 days to do so.
Spokesman Richard Herridge says: "While the UK banking industry has to date implemented every reform on PPI sales and complaints handling required by the regulators, the additional requirements in the policy statement effectively apply new standards to past sales, which we believe go beyond the rules and regulatory requirements which were developed by the regulator over time."
How to tell if you were mis-sold PPI
Today's ruling is set to open a floodgate for possible claims. So how do you know if you were mis-sold?
* Was it made clear to you that the PPI was optional?
If you feel you were forced to take out cover then you could have been mis-sold.
* Was it explained to you that past medical conditions mean you are not fully covered?
Many policies do not cover existing medical problem so if you have to be off work due to an existing problem your PPI may not pay out.
* Were you unemployed at the time you took out the PPI?
Most PPI policies include unemployment cover. If you were unemployed or retired at the time then this cover is of no use to you.
If you believe you were mis-sold PPI first contact your provider explaining your case. Failing that you can go through the Financial Ombudsman Service. Go to financial-ombudsman.org.uk and fill out the necessary form.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.