20 April 2011
The High Court in London has today ruled that UK banks must compensate millions of people who they ripped off by selling them often useless payment protection insurance (PPI). In the video Martin Lewis, founder of Money Saving Expert, accuses the banks of behaving “disgustingly” throughout the PPI scandal, and urges consumers to check whether they have PPI policies and if so to “reclaim, reclaim, reclaim”.
Banks are likely to have to shell out at least £5bn to settle consumer claims. PPI is a type of insurance they sold to retail customers alongside credit cards, loans and other finance agreements and was meant to insure payments are made even if a borrower fell ill or lost their job.
However, in many cases, PPI policies were useless and the banks knew it. Many were “sold” to consumers without their knowledge, with the amount secretly added to the loan amount. Over one million PPI policies were knowingly sold by the banks to self-employed people and students, who by definition cannot claim, since they don’t have “jobs” to lose.
What makes the saga so shocking is that more than 1.5m customers have already requested compensation from their loan providers but the banks have kicked the claims into the long grass by referring them to the Financial Ombudsman Service. The ombudsman is currently receiving 5,000 fresh claims for PPI mis-selling each week.
Oliver Morgans of Consumer Focus said: “This is a huge win for the millions of people mis-sold PPI. It has taken years of the banks being dragged kicking and screaming, but they are finally being forced to do the right thing by their customers.
“PPI is a clear example of everything that is wrong with the banking sector. It shouldn’t need the intervention of a High Court to ensure that bank customers are treated fairly.”
What happened today is that the High Court rejected the bid by Angela Knight’s British Bankers’ Association to seek a review of rules covering the compensation banks must pay customers to whom PPI was ‘missold’. The FSA welcomed the decision, saying it: “signals the end of years of poor complaint handling and will trigger a dramatic improvement in the way customers are treated when complaining.”
The BBA has said it may appeal.
In an interview with the Daily Telegraph last month, Mervyn King, the governor of the Bank of England, said UK banks had no qualms about making money at the expense of “gullible or unsuspecting customers”.