UK banks to pay out billions in compensation for wrong insurance sale
14 May 2011
In the UK, banks were this week told to pay up, without demur, compensation to people who were mis-sold payment protection insurance (PPI).
The banks' decision to abandon their legal challenge clears the way for millions getting billions of pounds in compensation. The "big four" banks - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC said this week that they would be required to fork out between them more than £5billion.
People who have been mis-sold PPI, are required to complain initially to the loan provider and if their complaint is not dealt with to their satisfaction within eight weeks, they would need to take the case to the free-to-use Financial Ombudsman Service, which has, until now, upheld three out of four cases.
If the ombudsman upholds the complaint, the consumer is put back in the position he would have been had he not been mis-sold the cover. The average payout for PPI cases upheld by the ombudsman is £2,750.
The service had, prior to this week's development, been receiving around 5,000 PPI complaints on a weekly basis.
Banks and other companies would need to look back at past sales even in instances where people have not complained, and contact customers if required. However, according to the FSA, a firm "will only have to act towards non-complainants if it finds recurring shortcomings in its own sales in the course of its own [investigations into its sales practices] ..." Some banks would likely be better in pro-actively contacting people.
