Figures from the Financial Services Authority (FSA) have revealed that the total amount of compensation paid to people who were missold payment protection insurance (PPI) reached a new high in November last year.
This follows a report from the Financial Ombudsman Service (FOS) which confirmed that there had bee a renewed surge in PPI complaints in the last quarter of 2011.
The PPI scandal has been ongoing for some time now and it looks like the backlash is set to continue.
PPI is an insurance policy that was sold to people who took out loans or a credit card. For a monthly fee, the insurance would protect the customer should they be forced to miss payments as a result of losing income by becoming unemployed, long term sickness or after losing work due to an accident.
However, many people who tried to claim on the policy found that they weren’t eligible to claim.
After a series of complaints, an investigation took place and the companies and banks who sold the insurance were found to have been misselling it to customers. The FSA concluded that all past sales of PPI should be reviewed and indicated that new rules should govern the future sales of the insurance product.
The British Bankers’ Association (BBA) appealed the decision and 200,000 complaints were put on hold. However, they lost the appeal early in 2011 and they were ordered to deal with the backlog of complaints by August 2011.
The banks had set aside £6 billion in funds to compensate aggrieved customers. Whilst some claims were rejected, the majority were upheld.
However, rather than the number of complaints starting to fall, the FOS reported a new surge in PPI complaints in the last quarter of 2011. 57% more complaints were received than in the previous quarter, a total of over 30,000.
The FOS indicated that they found that 68% complaints were upheld in favour of the customer in the last quarter of 2011. Whilst this figure was lower then the 92% success rate of complaints received in the previous quarter, it was close to the success rate for the whole of 2010 − 2011 financial year (66%).
Figures from the FSA indicated that the total compensation paid out on November 2011 was approximately £379 million. This was over 40% higher than the figure for October 2011 and the highest total for any month since the industry were forced to start paying compensation following the failed High Court Appeal in April 2011.
The surge in fresh PPI claims indicates that the fall in claims in the third quarter of 2011 was just a blip and the scandal shows little signs of letting up.
In November 2011, the FSA and the Office of Fair Trading (OFT) began a consultation on how to prevent a repeat of the same mistakes in the PPI fiasco. Replacement products are likely to be introduced and insurers want clear regulations in order to allow the PPI market to grow.