Thousands of consumers are in line for compensation ranging from hundreds to several thousands of pounds each after the Financial Services Authority (FSA) ordered banks to re open 185,000 complaints dating back to July 2007 about redundancy and illness insurance, commonly known as Payment Protection Insurance, (PPI).
The order has been given initially to firms responsible for selling more than 40% of single premium PPI policies when giving unsecured personal loans. With a single premium policy, a lump sum covering the cost of the insurance is added to the amount borrowed, so the customer ends up paying interest on both the insurance premium and the loan.
This tough stance by the city watchdog comes about after the Financial Ombudsman Service (FOS) revealed that on average firms providing PPI had rejected around 60% PPI complaints from consumers, around 16% of these had then gone to the FOS for investigation from which a staggering 80% were then found in favour of the consumer.
PPI policies are designed to offer peace of mind to consumers that their repayments will be covered in a time of crisis, such as illness or unemployment, but they are not cheap and can add as much as £700 to a £4,700 on a three year loan.
The Competition Commission has recommended that sale of all PPI policies are to be severely restricted from October 2010. The policies can still be sold but not at the time a lender grants the loan; instead they must wait until at least seven days has lapsed.
DebtWizard comment
Consumers should not be pressured or deceived into buying PPI, which has happened in thousands of cases.
It concerns me that the FSA is giving these firms one more last chance; instead they should have taken stronger action first time round.
Naturally it is in the lender’s interest to reject PPI claims, hoping the consumer will give up the fight. The FSA needs to take a harder line in enforcement action against firms that have a poor complaints handling procedure. These firms need to be named and shamed so that consumers can decide to boycott them, that way they will really feel the cost of poor customer care and devious selling methods.
I would also like to see the FSA now look at how PPI has been sold with credit cards, secured loans and mortgages where I suspect the same selling methods have applied and where not so many consumers as yet have complained.
Do you feel you have been mis-sold PPI and don't know where to start?
If this is the case then we have our very own easy to read questions and answers, Letter 1 template to request your terms and agreement and Letter 2 template to demand a refund, all free here at the DebtWizard guide to Payment Protection Insurance (PPI).
