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Good News - Payment Protection Insurance (PPI)

This decision means banks are preparing themselves to compensate millions of customers who were wrongly sold the insurance with theircredit card, loan or other borrowing.

Last week, Lloyds Banking Group announced that it had set aside £3.2 billion in readiness for potential claims. And Barclays says it has a £1 billion contingency fund.

Barclays chief executive Bob Diamond said: "We don't always get things right for our customers. When we get them wrong, we apologise and put them right."

Royal Bank of Scotland is also not contesting the decision, but has yet to say how much it will set aside for possible compensation.

How did the banks mis-sell PPI?
Many banks have been accused of mis-selling the expensive - and thus highly profitable - policy to customers who either did not need it, or had no chance of making a valid claim, due to age, health or some other factor.

"PPI was mis-sold and complaints about it mishandled on an industrial scale for well over a decade," said Peter Vicary of consumer champion Which?

When the financial watchdog the Financial Services Authority (FSA) announced late last year that banks had to review past sales, it meant the banks were on the hook for billions of pounds as they would be required to review all PPI sales - not just the cases of those who had complained.

So it is perhaps unsurprising that the banks challenged that decision, claiming it was unfair for new regulations to be applied to past sales. Indeed, many banks effectively put a freeze on handling PPI complaints.

The ruling in favour of the FSA is a bitter blow to banks, who now face a reported £7-£8 billion bill as a result of the watchdog's new regulations.

How to reclaim on a mis-sold policy
If you suspect you have been mis-sold PPI, your first step should be complaining to the bank or loan provider that sold it to you.

Be patient, as the banks can take a while in getting back to you. If they fail to respond within eight weeks, or you're unhappy with the response they've given, it's time to escalate. Get in touch with the Financial Ombudsman.

 

Richard Anthony Oakes, Sharon Linda Oakes & Ashley Burton trading as Oakes Insurance Consultants are
authorised and regulated by the Financial Services Authority. Number 307170

Registered office: Oakes House, Derby Road, Long Eaton, Nottingham NG10 1PD