THE CITY regulator yesterday unveiled tough new rules on Payment Protection Insurance (PPI) complaints that could force banks to dole out as much as £2.7bn in compensation to nearly 3m people.
Despite the financial services industry lobbying the Financial Services Authority (FSA) not to bring in the new sanctions to protect consumers, the regulator said it had found an even greater extent of mis-selling than it had previously assumed and substantial evidence that many claims are being dismissed by lenders.
The financial ombudsman has received nearly 115,000 complaints about the controversial product over the past five years, nearly a fifth of which have been lodged since April this year. The FSA said the measures, which require firms to analyse past complaints to identify if there are serious flaws in sales practices, must be adopted by December this year and warned that it would be “monitoring firms closely” to ensure they adhere to the new rules.
Dan Waters, director of conduct risk at the FSA, said: “We have worked hard with the industry to pull together a strong package of measures that we hope will allow the industry to draw a line under mistakes that have been made.”