PPI Scandal: New Compensation Rules Possible

The City regulator is to review whether current arrangements for compensating people mis-sold payment protection insurance (PPI) are working.

The Financial Conduct Authority (FCA) said today it was to collect evidence for a report due in the summer to consider whether new rules were required to improve the process.

Banks and other lenders have set aside more than £24bn to cover the costs of the mis-selling - the costliest scandal in the history of Britain's financial services industry.

PPI was meant to protect borrowers in the event of sickness or unemployment but was often sold to those who would have been ineligible to claim.

More than £17bn has already been paid out to consumers who were wrongly sold the policies and the flood of cash has been credited with propping up spending in the country's economic recovery.

Regulators have previously intervened to better protect consumers.

The FCA said this review would make sure the process was working for all sides.

The watchdog said: "The FCA will then consider whether further interventions may be appropriate, which could include a consumer communication campaign; a possible time limit on complaints; or other rule changes or guidance, or whether the continuation of the PPI scheme in its current form best meets its objectives.

"While this work continues, the FCA expects firms to continue to deal with PPI complaints in accordance with our requirements."

The FCA said that since January 2011, banks have handled over 14 million PPI complaints and paid compensation on more than 70% of those claims.

The Financial Ombudsman said on Tuesday that the number of complaints about loan insurance fell in the fourth quarter of 2014, but were still running at around 4,000 a week.

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