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FSA issues guidelines to lenders for mis-sold PPI letters

FSA PPI CCLsThe Financial Services Authority (FSA) has published recommendations for companies writing to customers who have been mis-sold payment protection insurance (PPI).

As some lenders have already started contacting customers to let them know they may have been mis-sold a PPI policy, the FSA has produced a set of guidelines detailing best practice for these firms.

As it is still at consultation stage, the guidance is not legally binding at present. Nevertheless, it outlines the regulator’s assessment of what PPI customer contact letters (CCLs) should contain, with a view to providing a framework for clear, fair and transparent communication between PPI providers and consumers.

You can download the full PDF here.

Background on the PPI mis-selling scandal


In November 2005, the FSA identified dishonest sales practices and a lack of compliance controls in the PPI industry. The FSA published a report on its findings and wrote to chief executives summarising the problems it had discovered.

In September and October 2006, a number of small firms were fined by the FSA for mis-selling PPI, and ‘enforcement procedures’ were served against 24 companies.

In January and February 2007, the FSA fined a number of major PPI providers for unfair treatment of customers, and the Office of Fair Trading (OFT) referred the issue to the Competition Commission.

Over the next 18 months, more PPI providers were fined, the Competition Commission published 2 papers detailing additional issues in the PPI market, and the Financial Ombudsman Service asked the FSA to investigate whether firms are dealing with PPI complaints satisfactorily.

In May 2009, the FSA banned the sale of single-premium PPI bundled with loans, and in September 2009, the FSA launched a consultation into how firms could handle PPI complaints better.

In October 2010, the banks sought a judicial review of the new rules, but the High Court ruled against them in April 2011. In May, the British Bankers’ Association confirmed it wouldn’t be appealing.

To date, over £2 billion has been paid out in compensation to victims of PPI mis-selling.

Context for the FSA’s latest intervention

In the second quarter of 2011, PPI providers were advised that they should begin sending customer contact letters (CCLs) to any victims of mis-selling, and were given 6 months to act on this advice.

The 6-month period has now ended, prompting the FSA to issue guidance on the content and presentation of CCLs.

Key points from the FSA’s guidance on PPI CCLs

PPI providers should contact all customers they believe may have been mis-sold PPI.

CCLs shouldn’t contain any marketing material or content that may distract from the key message.

Letters should indicate to customers that they have been mis-sold PPI, how this happened, that this may have caused them financial loss, and what steps they should take to resolve this.

Once customers have been contacted, their complaint will only remain valid for 3 years, after which they will no longer be able to claim compensation.

What does all this mean for consumers?


The Good

The fact that the FSA is advising PPI providers to contact potential victims of mis-selling is a positive step, as it means that customers may be alerted to the problem in cases where they would otherwise have been oblivious.

The FSA’s advice puts the onus on the industry to take responsibility for the problem, and aims to shift the emphasis back to fairness and accountability in a market where customers’ trust has been massively eroded in recent years.

The Bad

As things stand, PPI providers still have a long way to go before they regain the trust of consumers.

There is a possibility that, having made contact with customers directly, PPI providers may seek to settle cases as cheaply as possible. Some customers may accept settlements that are lower than what they’re entitled to because they don’t want to wait for the money or get into a protracted dispute with their bank.

Posted on in General.

PPI Claims Hit £1.9 Billion – But Billions Still Left to Claim!

PPI Claims have now hit £1.9 billion, as recently reported by the FSA. The rate at which claims were being made sped up dramatically towards the end of 2011, with a record pay out month in December, where £441 million was paid out.


PPI claims will undoubtedly have had a large impact on losses reported recently by Lloyds TSB.


However, reports in May 2011 suggested that claims were likely to reach £9 billion, suggesting that this could still only be the beginning of claims made against providers who mis-sold payment protection insurance policies for years.


A typical PPI claim results in around £2,750 in compensation, but there are widely reported cases of much higher claims successfully being made.



Mis-Sold Payday Loans Claims – The Next PPI?

Will mis-sold payday loans claims become the next PPI claims?

Consumers who were mis-sold payment protection insurance policies have been making PPI claims for several years now. Providers have been widely criticised for the way the policies were sold.

However, one financial product coming under more recent scrutiny is the payday loan. Lenders like Wonga, Uncle Buck, Mr Lender and a host of others lend smaller sums of money to consumers just to ‘tide them over’ until their next pay packet. The loans typically range from £50 to £750 and the sum must be paid back on the consumer’s next payday.

In many cases, the representative APR on these loans is over 4000%. So, for example, if you borrow £400.00 with for 30 days, you would have to pay back £525.00, but failing to make a repayment for a year could leave you owing more than 40 times what you borrowed!! Martin Lewis of Moneysaving Expert wrote a witty, if not somewhat alarming post on how long it would take to amass the equivalent of the US National Debt after borrowing £100 from Wonga! That post garnered a lot of attention!


Could Mis-Sold Payday Loans Claims Realistically be Successful?

Realistically, in order for anybody to make mis-sold payday loans claim, they have to be able to prove they were mis-sold the loan. Payday loans companies are generally all very up front about the product, about the representative APR and about exactly how much will have to be repaid if you take the loan out.

With PPI, common complaints included not being told you had the product with your loan or credit card. That’s because PPI is effectively a cross sell from another product (a loan, mortgae or credit card). It’s different with Payday Loans. The payday loan is the product and the consumer is aware of the product, of the cost of the loan and of its terms.

So while finance bloggers and experts speculate on whether mis-sold payday loans claims, it only takes a quick glance at the websites of the biggest providers to see the lengths they go to in order to make their fees absolutely crystal clear to potential customers. Yes, they’re an expensive way to borrow money and yes, it’s very easy to find yourself amassing debts far higher than the value of the loan, but as long as consumers are made aware of what they are being sold and as long as the product remains legal, there is no mis-selling taking place.

Number of Fatalities at Work Increases

The Health and Safety Executive released statistics last week that highlighted a worrying growth in the number of people killed at work.

In the 12 months ending March 2011, 171 people were killed at work in the UK. That is an average of more than 3 people per week. The figure for the previous year was 147.

The 171 workplace fatalities spanned a number of industries:

  • 34 in agriculture
  • 27 in manufacturing
  • 50 in construction
  • 3 in gas and electricity supply
  • 10 in water supply, sewerage, waste and recycling
  • 47 in the broadly name ‘services.’

An injury at work does not need to be fatal to be serious, though. If you have had an accident at work, you may be entitled to make a claim. At Moneybright, we can help with workplace claims, however serious the injuries. Get in touch today to find out more.

100,000 PPI Complaints to Ombudsman in Last Year

Figures from the Financial Ombusman Service released recently confirmed that, in the last year alone, there were than 104,000 complaints to the financial Ombudsman about PPI (payment protection insurance).

The complaints are not unexpected, with consumers now being made more widely aware of their potential right to make PPI claims.

PPI claims can be made by those who were mis-sold the PPI policies in recent years. This mis-selling was widespread, often deliberate and undoubtedly at huge financial cost to consumers.

At Moneybright, we can help you to make PPI claims. If you’re not sure whether you could be eligible, get in touch today and find out how we could help.

Managing Money for Christmas

Christmas is notorious for the higher credit card bills. There’s so much demand on our finances between the presents, cards, decorations and supplies for the big day. But the last thing anyone wants when it comes to January is a financial hangover from Hell. So what can you do to stop that happening?

Start the Shopping NOW

Encouraging you to shop might seem like an “alternative” way to combat the credit card hangover! But if you start early, you can spread the cost of Christmas over multiple months, rather than putting the entire burden on your December pay packet.

Pen and Paper

You can’t beat lists! No, that’s not just an obsession I have with putting pen to paper to scribe these things – they genuinely do help. Write down EVERYTHING you are going to buy, ensuring you’ve not missed a single thing and, most importantly STICK TO IT!

Impulse purchases will result in a nasty financial hangover.

Compare Prices

We have no excuse now not to compare prices given just how easy comparison engines online have made it. You might not think that saving a couple of quid here and there will make all that much difference but it adds up, especially when you’re buying dozesn of presents.

Try Not to Resort to Plastic

Purchases on plastic will invariably end up costing more, what with interest and even potential penalty charges. If you can avoid it, do!

More Time to take PPI Claims to Ombudsman

The Financial Services Authority today given people more time to take their PPI claims to the Financial Ombudsman. Presently, anyone seeking to make a PPI claim has 6 months from the time their clami is dealt with by their bank or provider, to then refer it to the Financial Ombudsman. However, this temporary extension for PPI cases will last until 27th October 2010.

A consumer may only go to the Financial Ombudsman service after receiving a final letter from their bank and not being satisfied with the outcome. Anyone who received this final letter between 28th November 2009 and 28th April 2010.

This comes after consumers have complained about the way providers have been dealing with PPI claims. Banks rejected 60% of claims last year, however of the cases referred to the Ombudsman, 90% were settled in favour of the consumer.

It was recently reported that the PPI claims cases could cost the industry billions as a result of widespread mis-selling of Payment Protection Insurance policies in recent years.

Mortgage Lending Reached £9.2 Billion in February

The latest Council of Mortgage Lenders figures indicate that mortgage lending his £9.2 billion for the month of February 2010. The figures include both secured loans for residential property purchase and remortgages as well. £9.2 billion marks a 6% increase on January’s figure of £8.7 billion.

The Council of Mortgage Lenders acknowledges that an increase in lending throughout February, the shortest month of the year, is unusual. However, this can most likely be attributed to the fact that the end of the stamp duty holiday for properties valued between £125,000 and £175,000 had a considerable impact on the figures for January and February.

The figures are down on last year’s numbers but as the UK emerges from the recession, it is hoped that the market will recover and that mortgage finance will become more readily available.

According to figures from Nationwide, the average house value in the UK in February was £161,320.

PPI Could Cost £4 Billion Says FSA

The Financial Services Authority, which last week announced further consultation on the PPI claims fiasco and how consumers should be compensated, estimates that the widespead misselling of PPI will end up costing the industry £4 billion.

The cost, it estimates, will be broken down roughly as £3 billion in compensation to consumers who have not yet complained and in the region of £1 billion in comepensation for those who have complained already. The FSA estimations indicate that this will be broken down roughly as follows:

  • £430 million cost to insurance brokers.
  • The rest to various PPI providers.
  • Around £120 million could fall to the Financial Services Compensation Scheme.
  • Costs associated with administrative element of handling compensation.

The costs are high, though this is not exactly unexpected given the scale of the problems with the selling of PPI policies. PPI mis-selling has included cases where:

  • Consumers have been led to believe that accepting PPI will increase their chances of a successful application for a loan or credit card.
  • Consumers have been led to believe that PPI is compulsory.
  • Consumers have been sold policies they would never be eligible to claim on.
  • Consumers have been sold policies without even realising it.

And that list is far from exhaustive. With this in mind and the growing media coverage surround PPI, it is likely that claims will increase over the coming year as more consumers realise that they may be eligible to reclaim PPI.

CCJs and Your Credit Record

A CCJ, or County Court Judgement is an order issued by a county court, which tells you how much you should pay and you should pay money owed to a creditor.

But how does a CCJ affect your credit record?

There is a nationally held register of all CCJs that is known as the Register of Judgements, Orders and Fines. This records many CCJs issued and they remain there for six years.  In order for a CCJ to appear on there, however, it must have been issued in default where no defence was entered at all (that is to say that the debtor failed to submit Admission Forms), defended and settled with payment being made in installments, or enforcement action must be being taken.

If you pay up in full within a month of receiving a CCJ, you will not be held on the register. If you pay in full beyond this time, your CCJ remains for six years but is noted on the register as having been ‘satisfied.’

If your CCJ appears on the register, the information that will be held about you is your name and address, date of the CCJ, amount it relates to, whether or not the CCJ has been satisfied and also the case and court number.

If you have a CCJ appearing on the register this will have a detrimental effect on your credit score.

Unfortunately, a CCJ rings alarm bells with many creditors and can make it particularly difficult to get credit. Even in cases where an individual with CCJs is able to obtain credit, the interest is likely to be much higher than that offered to those without such judgements.

Posted on in Debt.