Britain’s big banks and other financial institutions have been warned to play fair over refunds and compensation for payment protection insurance (PPI) they mis-sold to tens of millions of customers.
The Financial Conduct Authority (FCA), the powerful regulator overseeing the banking and related sectors, said it would be keeping a close eye on how individual financial institutions were dealing with claims for PPI. This is ahead of a deadline in 2019 for making applications for the mis-sold policy.
The FCA’s director of supervision, Megan Butler, said the watchdog would come down hard on banks that were not meeting their PPI obligations. “The deadline is the deadline, but if we find firms are not meeting the standards we expect, we will take action,” she said.
The warning comes after recent reports that some financial institutions were “dragging their feet” in dealing with customers’ claims for PPI compensation. According to the Alliance of Claims Companies, a number of large banks were increasingly claiming they had lost their customers’ data and were either unable to deal with their claims or that they were badly delayed in being processed.
A Big PPI Deal
PPI has become a toxic financial product, but it started out with good intentions. It was meant to protect consumers from failures to repay loans, mortgages, credit cards, vehicle financing and other products in the event they lost their job or became ill and could not work. Even if a customer passed away, PPI would kick in and cover repayments. It was supposed to be good for consumers and the financial institutions providing loans.
But the problem was in the way that PPI was sold to a largely unsuspecting UK public. Tens of millions of such policies (around 64 million, mostly from 1990 to 2010) were pushed on people by banks eager to lap up enormous amounts of commission in selling PPI. Many people didn’t know they had PPI attached to their loans or credit cards, while others felt pressured. They felt they had no choice but to accept it, and pay for the privilege, as part of their loan or financing application.
Since the PPI mis-selling scandal blew up and refunds and compensation started being paid in January 2011, a total of £27.9 billion has been handed over by the banks, credit card and financing firms and others. Much of this is handled by claims firms that employ such tools as claim management software to deal with high levels of claims so they can get clients their money as easily and swiftly as possible.
PPI Claims: Terminating
The FCA is not just warning banks to pay up over valid PPI claims, and this includes dealing with complaints via claims firms and their high-powered claim management software. It wants the public to be more aware that they may be able to make a claim — and to do so before time runs out. That’s why it has launched a multimillion-pound advertising campaign to urge as many people as possible to check if they can claim PPI.
Former bodybuilder, governor and Hollywood blockbuster actor Arnold Schwarzenegger was chosen to beef up the FCA’s claims message. He rules over it in animatronic form while blaring at people to take action now. “Our campaign aims to cut through the noise on PPI. We want to encourage people to decide whether to find out if they had PPI and whether to complain or not,” the FCA said.
It said that if it finds banks that are not up to standard in dealing with PPI claims, it may force them to write to their customers who might have had PPI and sort out refunds or compensation. The regulator added that it also would not hesitate to fine financial institutions or bankers themselves who did not treat their customers in an ethical and fair way.