Banks to write to all PPI victims
Banks must write to all payment protection insurance (PPI) victims, including those who have not claimed yet, says the City watchdog.
The Financial Services Authority (FSA) has outlined draft guidance on how the banks should contact people who may have been mis-sold PPI.
These letters should explain clearly why a customer may have been mis-sold PPI, how they can claim for compensation and the time limits involved. The FSA has also stressed the importance of any communication being jargon-free and easy to understand.
"This is important guidance and marks a key moment in the story of PPI. So far, the majority of payouts have been for complaints received before, or put on hold during, the judicial review. However, we are now beginning to see firms considering how to treat customers who were mis-sold but have not complained," says Martin Wheatley, managing director of the FSA.
The banks have now paid out £1.9 billion to people who were mis-sold PPI and successful claimants have received an average of £2,000 in compensation.
Consumer groups are also stressing the importance of people not using claims management companies. These are costly and will charge commission of around 30% for each claim.
Richard Lloyd, executive director for Which? says: "The message from Which? to anyone who thinks they might have been mis-sold PPI is simple: contact your lender, it's easy and free to do, and don't make the expensive mistake of paying a claims management company to do it for you."
PPI was originally designed to help repay people's loans if their incomes fell due to illness of if they lost their jobs but many polices were mis-sold. In April 2011, banks were told by the FSA that they had to start paying out this compensation.
Are you planning on making a claim for a mis-sold PPI policy? Read our guide to making a complaint and download a template letter here.
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 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.
Claims management companies
Regulated by the Claims Management Services Regulator since 2006, claims management companies offer advice and legal services in respect of claims for compensation, restitution, repayment for loss, damage or negligence. To many, the term is merely a polite euphemism for “no win, no fee” law companies. If you feel they offer services you need, approach with care.