UKbanks are struggling to contain the biggest financial mis-selling scandal in a decade, adding millions to the total cost of refunding victims of mis-sold Payment Protection Insurance, or PPI.
The logistics of dealing with mass demands for refunds has confounded some lenders, leaving hundreds of thousands of customers in limbo and leading to a sharp rise in the number of cases passed on to the independent ombudsman service.
New cases referred to the service by unhappy consumers are expected to jump 25 per cent next year to 285,000, a record figure. The main sellers of Payment Protection Insurance now face additional costs of about £58m next year, as regulators seek to penalise companies that fail to resolve disputes.
The £7bn predicted cost of refunds for millions of consumers wrongly sold PPI has already hit profits hard across the banking sector. But in order to meet the costs of dealing with more referred cases from unhappy claimants, the Financial Ombudsman plans to introduce a £350 surcharge per PPI claim to companies with more than 25 cases. The fee, on top of an existing £500 charge per case, will add tens of millions of pounds to the clear-up bill faced by those involved in mis-selling the insurance.
If introduced, the penalty would be the first fee ever applied to a single financial product. Banks said they would seek an explanation on the legitimacy of the proposed 70 per cent surcharge.
“One of the key questions we would expect the FOS to face in this consultation process is why it intends to increase charges for a process which is now more streamlined and therefore cheaper to carry out,” said the British Bankers’ Association.
So far about £1bn has been paid in refunds to consumers mis-sold PPI, according to the Financial Services Authority, which expects PPI to dominate complaints for the next two to three years.
Sally Bowyer, Managing Director of Brunel Franklin said “BrunelFranklin.com has helped thousands of people who have been victims of PPI mis-selling. If you have grounds for a refund, it will be pursued by our dedicated staff, experienced in the complexities involved to give you the very best chance of securing the maximum payout.”
Learn more about PPI refunds and find out if you could apply for a refund today! Visit the website www.brunelfranklin.com or call Brunel Franklin, free, on 0800 051 54 51.