PPI: the final countdown?

**The Payment Protection Insurance (PPI) scandal that rocked the UK banking industry may finally be concluded, if a request by the British Banking Association to introduce a deadline for further claims is granted. **

The Financial Services Authority (FSA) has recently confirmed that it will consider the introduction of a deadline for those affected by this mis-selling to claim for their losses. The most likely cut off date, should such a policy be introduced, is May 2014.

Since the 1990s, banks have attached insurance, referred to by most as PPI, to credit cards, mortgages and other loans. This insurance was to be used if the borrower became unable to repay the loan, due to a loss of their job, disability or other exceptional circumstances.

Whilst in itself PPI is not a bad policy, the recent scandal revolves around the nature of its sale and to whom it was sold. For example, if the consumer were self-employed, then the policy would be unable to provide in the case of their unemployment. Such was also the case for any pre-existing conditions of the consumer. Yet, the banks failed to ask these important questions, which led to the mis-selling of the policy. Astonishingly, it has been reported that some lenders were coupling the insurance with their loan and reporting it to be compulsory.

The FSA then brought out strict guidelines, following the exposure of this scandal, detailing how PPI should be sold, instructing, among other things, a seven day window between the date of the loan and the date at which PPI may then be sold to the consumer.

Following the landmark 2011 High Court case victory for the FSA, it was ruled that these guidelines would be applied retrospectively, entitling all customers previously mis-sold PPI, to a full refund.

For consumers, this was great news. All their previously overspent thousands were to be refunded, maybe spent on a holiday or a spontaneous purchase on a new car.

Whatever was to be done with the money, this decision did not sit easy with the banks. The
British Bankers Association, the representative of banks and other financial services firms, deliberated over appealing the decision previously set out by the High Court. Lloyds Banking Group, the UK’s largest banking corporation, were the first to withdraw from such action, stating they wanted to draw a line under the incident. Eventually, the BBA also decided against further action.

The growing PPI claim culture was increased by companies ‘piggy-backing’ on the scandal and appealing on behalf of their customers for a percentage of the final payment. Last year, as provisions mounted to over £10bn and their reputations continued to shatter, the banks began to plead with the FSA to impose a deadline.

One thing is certain: the banks are becoming more anxious of further claims. Despite some experts predicting that the entire industry stands to lose a total of £8 billion there have already been provisions made of greater than £10 billion.

The banks clearly anticipate a large amount of pay outs, so by promising to provide large advertising campaigns on how to claim, they hope to finally close this chapter on what is sure to be one of the greatest insurance scandals in British banking history.

Will such a deadline be imposed by the FSA? Only time will tell. Meanwhile, if you think you’ve been mis-sold PPI you should contact your bank; their provision could well be yours.