On 10 August 2010 the FSA published it’s long awaited policy statement on the sale of Payment Protection Insurance entitled: The assessment and redress of Payment Protection Insurance complaints.

Throughout the past decade it is thought that many lenders and finance brokers have routinely and systematically “mis-sold” PPI to borrowers. This has been done by a whole spectrum of lenders from the high street banks to the less well known sub-prime lenders who have pressured or mis-lead unsuspecting and vulnerable borrowers into paying £000’s for PPI which they did not want, did not need or could not use.

The phrase “adding insult to injury” comes to mind as many of the borrowers being mis-sold PPI were already in financial difficulty and seeking a way out by consolidating their debts into a more manageable monthly repayment. It could be argued that this desperation was exploited by the large sophisticated financial institutions.

It has been reported that the financial institutions have sought to deter the FSA and other regulators from enforcing new regulations and sanctions.

FSA findings:

The FSA found that there had been: “wide and deep evidence of weaknesses in PPI sales”.

Firms have been ordered to carry out a review of old complaints and consider compensation payments to borrowers where they have not even claimed. In our experience many people have not complained sooner because they were not even aware of the existence of the PPI on their loan. That is why we would urge everyone to look at their old loan agreements for PPI charges. Even if the loan is repaid there may still be possibility to claim if you feel that you have been mis-sold PPI.

The FSA found that the problems with PPI mis-sale were endemic. Upon analysis it would appear that many of the problems with the sale arise from the inherent flaws in the PPI product terms. Such as the polices only covering the first few years of a loan or the policies being for a fixed term and not providing a proper refund when the loans are paid off early.

There have also been huge commissions involved which we are not fully disclosed to the borrowers at the point of sale. These can easily amount to thousands of pounds for the sale of a single policy. Remarkably certain loan brokers sought to fight their corner with the FSA stating:

• They received less commission than the insurers and lenders from the sale of the PPI, who had designed a product which could not be sold compliantly;
• Lenders had set commission targets based on volume and penetration from the sale of the PPI with loans, and failing by brokers to meet these would have resulted in the withdrawal of the lenders business from them.

As a result of the FSA’s Policy Statement it expects firms will be dealing with 550,000 complaints for the next five years.

The BBC has reported that the average compensation will be about £1,800 for those who have been mis-sold single-premium policies. The benefit that we have attained for our average client is significantly above this figure.

Therefore if you feel that you have been mis-sold PPI then please do not hesitate to contact us. We can offer specialist advice and hopefully get back what you rightly deserve, and maximise the compensation recovered by you.

- Matthew