PPI compensation could reach £2.7bn says FSA regulator

Two and three quarter million people could be refunded as much as £2.7bn for being mis-sold Payment Protection Insurance (PPI).
The Financial Services Authority (FSA) has given banks and other lenders until 1 December to adopt new rules for dealing with PPI complaints.

The FSA said that over five years it had found “wide and deep evidence of weaknesses in PPI sales”.

PPI insures people’s loan re-payments if they fall ill or lose their jobs.

The FSA expects its new rules to force the financial services industry to deal with about 550,000 complaints a year for the next five years.

Average compensation will vary from £900 for those who were mis-sold about regular-premium PPI policies to £1,800 for those mis-sold single-premium policies.

A long running campaign by consumer groups such as Citizens Advice and Which? has accused the sellers of PPI in engaging in a widespread “protection racket”.

They have accused lenders and others of selling the insurance alongside loans when it was unnecessary, without telling the borrower they were even paying for a policy, or of selling policies on which the borrower could not in fact claim.

The financial services industry has been engaged in a behind-the-scenes campaign to deter the regulator from bringing in the new sanctions, arguing that they are either unnecessary or disproportionate.

But the FSA has finally decided to act.

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