Hundreds of thousands of people who believe they were mis-sold payment protection insurance (PPI) could get their money back after the financial watchdog ordered firms to reopen previously rejected complaints.
The move is the latest measure unveiled by the Financial Services Authority (FSA) in an attempt to clean up the PPI sector and protect consumers from high-pressure sales tactics. It has already banned the sale of single-premium PPI alongside unsecured loans.
Now, the FSA has ordered firms to reopen and reassess around 185,000 previously rejected PPI complaints. The watchdog is also issuing new guidance that explains how firms must handle and assess PPI cases.
Plus, the firms that dominated the single-premium unsecured loan PPI market have been ordered to carry out reviews of past sales and redress consumers identified as having been mis-sold policies.
“This is the last chance for the industry to show that it can act fairly, consistently and in the best interest of consumers on PPI,” says Jon Pain, managing director of retail markets at the FSA.
“Where we find questionable practices in sales or complaint handling, firms can expect that we will take action.”
In addition, firms that continue to sell PPI alongside secured loans and credit cards are to be investigated to ensure they are following proper processes.
The FSA says it will carry out targeted assessment of sales practices, and will force firms where there is a potential for mis-selling to carry out proactive reviews.
Despite consumer groups welcoming the action, there remain concerns about redressing PPI customers who have not complained.
Adam Phillips, chairman of the Financial Services Consumer Panel, which represents consumers to the FSA, says: “The selling of PPI has a notorious history. The FSA still needs to tackle PPI sold with credit cards, secured loans and mortgages where people may not have complained.”
In addition, the level of compensation is also a cause for concern. For example, banks may only refund the difference between the PPI policy bought and an alternative regular premium PPI policy, in order to avoid paying full redress to consumers.
Louise Hanson, head of campaigns at Which?, says: "While it’s good to see the FSA make firms review cases they’ve wrongly dismissed, we’re concerned about loopholes. Consumers could still be left paying over the odds or with too little compensation, so the FSA needs to monitor the review process closely."
Which? also wants to see more fines issued against firms with bad complaints handling.
The FSA has taken action against 22 firms over poor PPI sales practices, including Alliance & Leicester and HSBC.
"It’s not enough to tell them to go back and do better the second time round," she explains. "Unless big fines are levied, businesses will keep on unfairly dismissing complaints, safe in the knowledge that if they get caught, all they’ll have to do is go back and look at them again."
The Consumer Panel expects the regulator to take further action, with firms responsible for the mis-selling of PPI hit with huge fines.