PPI mis-selling could cost brokers £430m
by Gill Montia
Story link: PPI mis-selling could cost brokers £430m
The Financial Services Authority (FSA) has estimated the cost of compensating customer who have complained of being mis-sold payment protection insurance (PPI) at between £700 million and £1.2 billion.
However, the regulator puts the cost of compensating customers who have yet to complain at between £1 billion and £3 billion.
The figures are contained in the FSA’s latest consultation paper on the PPI mis-selling scandal, in which the Authority also estimates that up to 20% of PPI is sold via brokers, depending on the product.
The FSA states: “We estimate that, taking into account both the impact of our complaints handling guidance and the potential cost of any reviews of sales to non-complainants, these brokers may be liable for up to around £430 million of total redress costs.”
Commenting of the document, financial research company, Defaqto, says the ramifications for the PPI industry could be “extremely costly and serious”.
However, the firm’s Insight Analyst, Ben Heffer, expects there to be plenty of legal argument.
He explains: “The banks and lenders are not going to want to give up this much revenue without a fight and some respondents to the FSA have already challenged their authority to do what they are proposing.”
Adding: “The FSA document is written in a tone which makes it clear that it has had enough and is really serious about shaking up the industry … it is also clear that there is significant disagreement between the FSA and the industry.”
Defaqto’s research also revealed that most of the problems with mis-selling have occurred where PPI has been sold alongside unsecured and secured second charge loans, and, to a slightly lesser extent, credit cards.
Those customers who have been sold regular premium mortgage PPI are least likely to have been mis-sold.