It is estimated that approximatley 3 million people with Payment Protection Insurance (PPI) Policies may be in line for PPI Compensation totaling nearly £2.7 billion.

The FSA (Financial Services Authority) issued new rules on 10th August 2010 laying out how firms should handle complaints from customers regarding PPI Refunds. This is expected to increase the number of claims being made on PPI policies and subsequently the banks are bacing themselves for massive payouts over the coming year.

Prior to the new rules set out by the FSA, many firms were automatically rejecting mis-sold PPI complaints, leaving customers to have to turn to the Financial Ombudsman Service (FOS) to resolve their complaints. The FOS has revealed it has received more than 100,000 complaints about PPI already, with nearly 2,000 of these, received in the last week alone. Four out of five cases taken to the FOS were decided in favour of the customer, with the firm selling PPI, having to pay compensation typical of around £1,500.
The FSA has said “Data (received from 18 major sellers of PPI) shows that on average, firms reject almost half of the PPI complaints they receive, but some reject nearly all. Around 30% of rejected complaints go on to the ombudsman, where more than 80% are overturned in the consumer’s favour.”
It is estimated that the number of complaints about PPI will rise to around 550,000 a year for each of the next five years as a result of the FSA’s new rules.
Citizens Advice debt policy officer Peter Tutton said: “We welcome the fact that the FSA is taking firm and appropriate action to get to grips with the harm done to consumers by widespread mis-selling of PPI over many years. Evidence from our CAB network has consistently shown that too often consumers have been mis-sold PPI policies that are far too expensive and completely unsuitable for their needs, often contributing to debt problems. A huge step to restoring consumer confidence is ensuring that people who complain get a fair hearing and proper redress. Up until now, firms have too often handled complaints very badly, so FSA action to spell out to firms what is expected of them was absolutely necessary.”