According to the Financial Ombudsman Service (FOS) approximately 90% of mis-sold payment protection insurance (PPI) claims are being honored, with claimants receiving compensation payments worth anywhere from hundreds to thousands of pounds. With the startling number of PPI claims being filed against high street banks, the total amount of PPI compensation financial institutions have paid out during the first six months of 2011 has reached an astonishing £557m.
Although PPI compensation payouts can range anywhere from a few hundred to tens of thousands of pounds, the average compensation payment ranges anywhere from £2700 to £3000. Since 9 of every 10 people that file for mis-sold PPI compensation have their claims honored, every 10 people that file a PPI claim caused banks to pay out approximately £25,000 to £50,000. More than 532,000 people filed PPI complaints during the first half of the 2011 fiscal year.
Payment protection insurance is supposed to provide protection for borrowers in the event that they are unable to make repayments toward their mortgage, credit card, or other type of loan. However, many lenders and financial institutions have been mis-selling PPI policies by offering them to individuals that are not actually eligible for coverage. As a result, many borrowers are filing complaints and receiving refunds for all of funds spent on the mis-sold PPI policy.
In May the Financial Services Authority (FSA) urged high street banks to expeditiously proceed with paying out compensation payments, stating that the banks had to meet a deadline of processing all 200,000 backlog claims before the end of August. The total amount of compensation paid out during August alone reached £230m.
According to FSA guidelines, banks have eight weeks to process a PPI complaint. However, this does not mean compensation payment must be issued within that timeframe, but that a decision regarding the complaint must be made before the end of the a week. Most consumers have chosen to file their complaints through a claims management company or professional PPI solicitor, and most complaints are brought before the Financial Ombudsman Service by these representatives on behalf of the complainant.
