New Calls To Investigate The PPI Scandal

New Calls To Investigate The PPI Scandal

by David Redmond on 30 Apr, 2012

The Treasury faces new calls to conduct a full inquiry into the mis-sold PPI scandal.

The issue of mis-sold PPI continues to hit the headlines, threatening new woes for banks already suffering substantial losses.

The PPI scandal emerged after Payment Protection Insurance was mis-sold to consumers by banks and other lenders. While PPI is often sold as part of the deal when consumers take out a loan, mortgage or credit card, it was found that millions of customers had no idea that they were signed up for the additional payment to their monthly premiums, or believed that the policy they had signed up for was different from the coverage they were actually receiving. Charging a customer for a service without their knowledge is unlawful – whatever the circumstances.

From 25-28 January 2011, the British Banker’s Association (BBA) was taken to court by the Financial Services Authority (FSA) and Financial Ombudsman Service (FOS) over the mis-selling of PPI policies. A High Court judge ruled on 20 April that the BBA had been unsuccessful. The BBA subsequently announced on 9 May that it would no longer appeal the ruling of the High Court, and that the banks would award compensation for any valid complaint they received.

And it’s not just individuals who are able to claim. Earlier this month, an investigation by the Sunday Telegraph discovered that small businesses were also hugely affected. It was discovered that all of the UK’s major banks – including Barclays, HSBC and the state-owned Lloyds Banking Group and Royal Bank of Scotland – had sold highly complex interest rate derivatives to small businesses, including a fish and chip shop, care homes, garden centres, farms and hotels.[1]

The FOS may provide some further details into the investigations – having been dealing with a continuous flow of complaints in recent months – and called upon the Government to do more to prevent more customers being affected.

Lord Oakeshott, former Liberal Democrat Treasury spokesman, also spoke to the Daily Telegraph this month: “It looks like we could be facing another round of the dreadful mis-selling scandal when Payment Protection Insurance was sold by the banks. Last time it was personal customers, now it looks like it was small businesses. When will the banks start helping their customers before themselves? I will be tabling questions to the Treasury.”[2]

It appears that the Treasury has already started gathering evidence of what complex derivaties have been sold to small businesses. It has asked the Federation of Small Businesses (FSB) – which had already drawn attention to the issue – to survey their members to find out whether the practice was widespread.



About the Author

David Redmond

David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.