Record amount of PPI compensation paid in November

| January 26, 2012 | 0 Comments
Record amount of PPI compensation paid in November

Compensation paid to consumers who were mis-sold Payment Protection Insurance (PPI) reached a record £379m in November, compared with £268m in October.

PPI was routinely sold alongside loans to protect re-payments if the customer fell ill or became unemployed, but many people were sold policies that were invalid because they did not meet the qualifying criteria.

Lenders were under commission for every PPI policy they sold which led to some salespeople misleading customers by telling them that the loan would not be authorised unless PPI was taken out.

Millions of consumers were mis-sold PPI and it is estimated that up to £9bn will be paid out in compensation.

The number of PPI complaints received by the Financial Ombudsman Service (FOS) increased by 10 per cent to 55,907 in the final three months of 2011, compared with the previous quarter.

In November the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) launched a joint consultation on how to prevent the problems associated with PPI being repeated in the replacement products being brought to market.

The consultation closed on 13 January 2012 and specialist Lloyd’s insurer, Jubilee, is pressing for the two agencies to provide regulatory certainty in order to allow the PPI market to grow.

Jubilee’s head of personal lines, Chris Biles, said: “Anything which helps to clarify the responsibilities of both distributor and insurer has to be welcomed.

“But the FSA and OFT must recognise that there is a clear role for both lenders and insurers in helping to ensure that borrowers have access to appropriate ways of reducing the risk of being unable to maintain financial commitments.

“The key will be that any solution is designed to be easily understood and matched to the specific needs of the customer.”

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