In the UK, many customers were mis-sold payment protection insurance (PPI) policies, and at least one expert commissioned by the BBC estimates that underpayments may be “in the region of Pounds 1 billion.” Firms will reopen 2.5 million cases from 2012 and 2013 in which claimants may have been under-compensated or otherwise treated unfairly.
PPI is a form of insurance that helps owners pay loan repayments in the event of unemployment or inability to work. However, policies were widely mis-sold, leading to the development of a large-scale compensation program in 2007 for those who filed a PPI reclaim.
Since then, over 13 million complaints have been processed. In the past three years, over Pounds 16 billion has been paid out, with Pounds 390 million of that going in June.
In spite of this, however, the Financial Conduct Authority (FCA) noted a recent decline in the number of customer complaints leading to compensation. This has led them to order the reopening of 2.5 million claims to ensure that customers who may have been under-compensated or mis-sold insurance policies will be treated fairly.
In addition, there is some question as to whether or not those customers who did receive compensation were treated properly. In many cases, banks paid back premiums and interest due to mis-sellings, but ignored charges due to premiums of the policies.
In many cases, these premiums “put people over their borrowing limits,” incurring additional fees. Banks having ignored these fees has resulted in sometimes drastic reductions in the pay-outs customers are receiving.
The FCA has “told the BBC that it is already discussing the issue with the banks involved,” and is working hard with the Ombudsman to ensure this situation reverses itself. The former reports that seven out of ten customer complaints are upheld on average.
About 3.2 million letters have been sent to notify people who may have been mis-sold PPI that they can seek compensation. About 2 million more are waiting to be sent out.
