Tuesday, 6 March 2012

12 million PPI letters

Millions of letters are about to be sent out by banks, telling customers that they may hav e been mis-sold Payment Protection Insurance and can apply for compensation.

Today the Financial Services Authority is expected to tell banks what the letters should say, in a move which is likely to trigger billions of pounds worth of additional claims.

Payment Protection Insurance or PPI was sold by banks, credit card companies and other financial firms to cover payments on loans if the policyholder fell ill or lost a job. But often it was to people who didn't need the insurance or couldn't use it.

£2bn has already been paid to customers who complained. On top of that, banks have been preparing a mass mailout of up to 12 million letters.

They are under pressure from the FSA, which is anxious that they contact possible victims of PPI mis-selling who haven't yet put in a claim.

The FSA is worried that the letters wo't be clear enough to prompt people to seek compensation. So the watchdog is likely to require banks to state clearly that the customers may have been mis-sold, may be entitled to compensation and should act quickly.

The trawl for more people who have lost out could lead to compensation payments worth £3bn. Banks have already set aside £7.6bn to cover the total compensation bill.

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