More than five years after doubts were first raised, Britain’s biggest banks have finally admitted their collective failings over selling payment protection insurance (PPI).
Last week, they abandoned a legal action over the rules used to assess mis-selling claims, opening the door for hundreds of thousands of claims to be processed.
The insurance was supposed to safeguard customers’ repayments of their credit cards, personal loans or mortgages in the event of illness. But policies were often poorly explained and sold to borrowers regardless of their needs.
The banks argued the new claims rules, imposed by the Financial Services Authority and the Financial Ombudsman Service, were too harsh. But the High Court rejected their case and now the British Bankers’ Association has decided not to appeal.
Barclays, HSBC, Lloyds and Royal Bank of Scotland have now set aside more than £5billion to cover claims, while other firms have also had to make provisions. Principality Building Society, for example, owns specialist lender Nemo Personal Finance, which also joined the BBA court case. It has put aside £19.8million against the bill for Nemo’s mis-selling.
The first priority for the banks is to deal with a By Stephen Womack backlog of existing claims, hundreds of thousands of which have been put on hold while the legal battle raged. Most banks are bringing extra staff into their complaint teams to clear the backlog.
This gives Scott Stanley hope that his complaint will be assessed. As an 18-year-old school-leaver, Scott took out a £7,500 loan from Lloyds to help him buy a car. Scott, now 23, was also sold PPI alongside the loan, adding an extra £900 to the total repayments.
‘I was told taking out the insurance would increase my chances of getting the loan,’ he says. ‘I was also advised to borrow £7,500, more than I needed, because it was a lower repayment interest rate. At 18, I didn’t know any better.’
But the cover proved worthless. Scott, who lives in Eltham, southeast London, and works as a patent clerk, says: ‘I lost my job during a probationary period but my claim on the insurance was refused because they said it was not a proper redundancy. I got behind on the loan payments and have been trying to catch up ever since.’
He submitted a claim to Lloyds last year that has been in limbo pending the outcome of the court case. Scott, who is also training to be a police special constable, says: ‘I’m hoping things will start moving along now.’ He has hired claims management company Investor Compensation to present his case. It will take 25 per cent of any compensation as a fee.
While claims companies have helped customers take the fight to banks in the past, consumers have been warned to be wary of rogue companies looking to cash in on last week’s climbdown. There is no need to pay upfront fees or high charges to have your case investigated.
In some cases, wronged customers may not even have to complain. Under FSA rules, banks also have to undertake a ‘root cause’ analysis, looking at whether their insurance was sold with the customers’ best interest in mind.
Where widespread flaws are found, they will have to write to customers who may have been wrongly sold PPI inviting them to complain. This process will get under way later in the summer.
The FSA thinks that this could unearth up to two million more cases of mis-selling.
Source : Dailymail
