dispute resolution

Banks Receive PPI Compensation Setback

on Friday, 23 March 2012. Posted in News, Legal Disputes

The long-running battle between banks and their customers over alleged mis-selling of Payment Protection Insurance (PPI) plans took another step forward recently when the High Court dismissed a challenge brought by the banks on the basis that guidance issued by the Financial Services Authority on sales of insurance did not apply to PPI policies.
PPI policies were sold aggressively by banks to customers who took out loans. They insure the person taking out the loan in the event that they lose their job or are unable to work because of illness, with the insurer covering any loan payments due during the period of unemployment or incapacity. The cost of the policy was normally added to the loan on day one, meaning that if the debt were paid off early, premiums had been incurred unnecessarily. Typically, a PPI policy would add more than 20 per cent to the amount of the loan.

The move paves the way for customers to receive refunds of premiums paid. The banks have said that they will not appeal against the decision. The estimated £4.5 billion cost will inevitably end up being met by the customers of the banks – possibly through the demise of free bank accounts.

Barclays has announced that it will meet all claims that were lodged before 20 April 2011 in full, with 8 per cent interest also being paid.

If you have suffered a loss through being mis-sold a financial product, you may be able to obtain redress. Contact us for advice.

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