Banks are writing to millions of customers advising them that they may have been mis-sold payment protection insurance (PPI), following the release of new guidelines by the Financial Services Authority (FSA).
The FSA estimates that between four million and 12 million letters will be sent out, but not everyone who has been mis-sold PPI will receive a letter as banks are only required to write to those who have been ‘systemically mis-sold’ PPI.
Consumers are therefore advised to check if PPI insurance was added to any loans, credit cards and store cards taken out in the last 10 years, even if they do not receive a letter from their lender.
Under FSA rules, the letters sent out by banks must be written in jargon-free language and should clearly state a time limit for making a complaint.
The letters must also be free from marketing materials and must explain clearly that the customer may have suffered financial loss and may be entitled to claim some money back.
Customers must respond to the letters to make a claim for compensation and can do so directly without having to use the service of claims management company.
Banks paid out £1.9bn in compensation last year to people who were mis-sold PPI when they took out loans and credit cards.
The insurance is designed to safeguard repayments if the customer is unable to make them – through illness or redundancy for example – but sales staff were often offered incentives to sell PPI, leading to unethical sales techniques being used.
Consumer were sometimes led to believe that PPI was compulsory, or told that taking out PPI would increase the chance of a loan application being approved.
In some cases PPI was added to the product being purchased without the customer’s knowledge.
Banks are now sending out letters in an effort to deal with customers who may have been mis-sold PPI, but have not yet complained.
Martin Wheatley, the FSA’s managing director said: “By ensuring that firms are clear about the problems they have identified and the potential redress due, we are aiming to prevent people running out of time if they choose to complain.”
Michael Pilgrim, a PPI specialist for claims management company Randall & Vickers, is calling for the Chancellor to set a deadline for banks to pay compensation for PPI mis-selling, in the forthcoming Budget.
Tags: claims management company, Financial Services Authority, PPI mis-selling, Randall & Vickers
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