The Banking Industry Considers PPI Deadline Proposal

It has been reported that the UK banking industry and the Financial Services Authority (FSA) are considering placing a deadline on Payment Protection Insurance claims in an attempt to temper the number of complaints being made.

A backlog of complaints and billions of pounds worth of payouts are currently being disputed by affected customers and their banks. The proposed deadline is an attempt to help the UK Banking Association tackle the growing backlog and costly stream of PPI claims. This is sure to upset UK citizens who plan to make a PPI Compensation claim with more than 1,000 complaints being made every day.

The proposal is not yet set in stone but is being considered alongside other options. An FSA spokesperson revealed: "As you would expect for an issue of this scale and complexity we have discussed and considered a number of different options and continue to do so. PPI is an ongoing and high-profile issue and we are monitoring it closely."

UK banks and lenders are concerned that they will have to make further contributions to the PPI Compensation reserve. So far, the major banks and lenders in Britain have set aside more than £12bn to repay customers who are entitled to compensation. Any further contributions will have to be revised should this deadline come into effect.

The most effected bank to date is Lloyds Banking Group who has set aside a staggering £5.3bn. Barclays recently added to their PPI reserve which now totals at £2bn.

As well as costing many of the major banking groups a significant amount of money, an insurmountable damage has been done to the entire industry’s image. Watchdogs and financial groups are now calling for a clearer, more transparent approach to the financial services industry.

The FSA’s managing director Martin Wheatley compared the PPI scandal to an oil spill in respect to the long term effects and ongoing damage.

He claimed: "One of the key lessons we have learned from previous market failures such as PPI is that it can be much more effective to intervene early; to pre-empt and prevent widespread harm to consumers from happening in the first place, rather than clear up after the event." 

Payment Protection Insurance was designed as a safety product in loan and credit card deals. The product was originally supposed to aid customers make repayments on credit card or loan deals. However it was widely sold to customers who did not request or require it. In some cases, the customer was not even aware that the product had been included in the deal. Those who have been mis-sold the product as part of a credit card or loan deal may be entitled to compensation.

PPI Complaints now Topping 1,000 a Day

It has been described as the largest financial scandal in British history. It is calculated that there is now more than 1,000 complaints regarding Mis-Sold Payment Protection Insurance being made every day. With banks and lenders falsely rejecting a significant number of complaints, Claims Management Companies and the Financial Ombudsman Service (FOS) have had to pick up the slack to try and bring monetary justice to those who were Mis-Sold PPI.

Banks and lenders are unfairly rejecting tens of thousand of Payment Protection Insurance complaints. Many of these rejected parties are refusing to take no for an answer and seek the compensation that they deserve elsewhere.

Out of the UK banks and lenders, Lloyds Banking Group has been the hardest hit. The banking giant has had to set aside more than £5bn to cover the Payment Protection Insurance repayments that they expect to make. The bank receives 65,200 complaints regarding PPI every month. Of these 1,600 are rejected and subsequently referred to the FOS. Out of this 1,600, a staggering 98% are upheld by the FOS. This suggests that 98% of PPI Refund complaints refused by Lloyds are unfairly done so. Similarly Barclays were found guilty in 93% of cases, Royal Bank of Scotland 87%, HSBC 66% and Nationwide 18%.

In early 2011, the banks which were guilty of mis-selling Payment Protection Insurance lost a decisive court case which determined that they would have to pay the refunds to the affected customers. Although this decision tied their hands, banks have complained of customers seeking compensation that they are not entitled to. Banks and lenders have described some customers seeking PPI Compensation as ‘ambulance chasing’ opportunists. Banks and lenders offered Payment Protection Insurance as a product to protect their payments. It was intended to help customers make repayments on credit cards and loans even in times of financial or medical hardships. However, many of these policies were sold to customers who did not request or require them. In some cases, the product was sold to those who were not even applicable and had no use for the product.