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.
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