The Financial Conduct Authority (FCA) has issued a statement concerning the Payment Protection Insurance (PPI) redress work. The FCA has stated that they have improved the process for handling complaints and that there are over 2.5 million complaints currently being reviewed.
Lenders and credit providers have agreed to review these complaints which have been filed during 2012 and 2013. The complaints all state that their claims for reimbursement were not handled properly and that they did not receive a fair amount in their refund. Some of these complaints also include denials for compensation that should have qualified for repayment.
PPI review of 2.5 million PPI Complaints
The FCA believes that it is very important for these banking and lending institutions to make the effort to review these cases and make the appropriate refunds to help reestablish trust in this industry.
The FCA has provided additional information about the redress effort which included the following facts:
- Since 2007 here have been over 13 million PPI complaints filed.
- The FCA began tracking payments made by the lending institutions in January 2011 and since that date have tracked over £16 billion in redress payments.
- 70 percent of all claims are held up in favour of the customer.
- Over one million complaints have been received by the Financial Ombudsman Service in regard to the treatment that they received by the provider. This usually concerned the amount of the refund. These complaints equal about one-fourth of all denied claims.
- Over 3.2 million letters have been sent to people who have most likely been mis-sold PPI and have not filed a complaint.
- It is anticipated that an additional two million letters will be sent out as records are reviewed and more potential clients are found. This will take place over the net several months.
Additionally, the report stated that the FCA is going to great lengths to review the processes each company is using to determine PPI eligibility and redress amount. He further explains the steps taken with management in each of these companies to ensure that these policies are followed.
A Brief History Of The Problem
Payment Protection Insurance is an insurance policy that covers payments on your loan or credit card in the event that you have become unemployed or too sick to work. These policies are available from private agencies and are not just limited to financial institutions or credit lenders. However, many of these institutions incorrectly led their clients to believe that they were the only providers of this insurance.
Some lenders went as far as to mandatory make clients purchase this type of insurance from them to qualify for the credit line. Many of these policies were very overpriced and aided in placing the consumer in larger debt.
By 2007, it was found that this practice was in violation of lending laws and all financial institutions that had participated in this practice were required to give redress to their clients for mis-selling them PPI.
Millions of claims were filed and the system quickly became burdened. Consumers who were entitled to redress payments were being actively denied in their claims, and millions more were not even notified of their rights. By 2011, the FCA had to step in to protect the rights of the consumer.
Improving Uphold Rates
The FCA describe uphold rates as the rate at which the Ombudsman ruled in favor of the consumer regarding their complaint. By 2011, the uphold rate was at 88 percent. This was unfathomably high and the FCA quickly stepped in to overlook the problems. With almost 9 out of 10 complaints being ruled in favor of the consumer, the FCA knew that they must intercede and look over the practices of the lending companies for approving redress payments.
While the FCA will admit that every company handles things differently, they discovered problems right away and were able to solve many issues concerning how companies were processing redress payments. By the end of 2012, the uphold rates had dropped to 60 percent, and by the end of 2013, that number further decreased to a 56 percent uphold rate. The FCA has stated that this downward trend is expected to continue this year and in the future until this problem has ended.
The FCA believes that in 2015 the PPI redress issue will begin to slow down. Most people, but this point, will have received their fair redress amount or will have been notified that they need to make a claim in timely manner. While finishing this problem may take a few more years, it will be completed in a more orderly fashion.
The FCA is also overlooking additional redress issues that are taking place concerning different schemes such as Interest Rate Hedging products, credit card protection services and identity theft protection. The FCA has stated that these newer redress issues will be handled much more carefully and in a timelier manner because they have learned from the PPI scheme how to be more efficient.
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