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PPI Payout

In December 2010, the British Banking Association launched a high court challenge of new Financial Service Authority rules regarding PPI refunds. Whilst they felt the guidelines were unfair in stating that there was no time limit on PPI claims, the High Court ruled against them. In order to understand just how significant the PPI payout is expected to be, it is first necessary to understand just why lenders were appealing the previous ruling. Here is a little bit of PPI history.

PPI Hits the Market

Sometime in the latter part of the 1990's a new insurance product hit the financial industry. This insurance cover is called 'payment protection insurance' and it was initially meant to provide cover for working individuals in the event that they lost their source of income rendering them unable to make monthly loan payments. Unfortunately, it was a poorly conceived insurance product as cover was minimal and too many people were ineligible to receive benefits. Many lenders sold it anyway as it gave them a nice hefty way to increase their profit on loans. The premium was paid one time at the loan's origination, the bank 'loaned' the premium to the borrower who in turn had to pay back that money in monthly instalments along with the amount they had originally intended to borrow.

Enter the FSA

Here is where the controversy begins. In 2005 the Citizens Advice Bureau launched an all out campaign against the mis sale of PPI. Guidelines went into effect and every time a borrower won a claim against the lender for the mis sale of PPI the lender made a PPI payout to the consumer which was in effect a PPI reclaim plus any compensation awarded. Also in 2005 the government placed PPI under the direct jurisdiction of the Financial Services Authority however claimants could file claims dating back as far as the late 1990's if PPI was mis sold and the lender had to make a PPI payout. At this point lenders began to rebel saying it wasn't fair that the FSA could regulate something that came before they were in power.

High Court Upholds Previous Ruling

Lenders appealed to the High Court and the result wasn't quite what they expected. The High Court upheld previous rulings and lenders were still liable to pay retroactive claims pre-dating the authority of the FSA. Now the sum total PPI payout is going to be billions of pounds more than originally planned for. Four of the 'big six' UK banks alone have set aside more than £5 billion to meet the projected PPI payout and it is estimated that that amount still won't be sufficient. There are a backlog of PPI claims waiting to be reviewed with every major lender in the UK and more are on their way. In fact, even the current PPI payout figure that was recently released may not be great enough to cover all those claims for refunds and compensation on mis sold PPI cover in the UK over the past 10+ years. If you feel that you have been mis sold payment protection insurance then you may qualify for a PPI refund. Contact a claims handler today to get your claim underway. Call 0207 471 2000.

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