Watchdog issues alert to customers over low settlement offers.
Customers who reclaim mis-sold loan insurance from banks and other lenders are being warned not to accept "gesture" payments worth a fraction of their potential payout.
Nine out of 10 Payment Protection Insurance (PPI) mis-selling claims rejected by lenders are now being upheld by consumer watchdog the Financial Ombudsman Service, up from a historical level of 40%. It says this is because borrowers have been "fobbed off" with less than they are entitled to.
A spokesman for the Financial Ombudsman Service (FOS) said "Our concern is that lenders across the board simply aren’t learning and are making the same mistakes," he says. "The real worry is that those individuals’ mis-sold policies who don’t realise they can use the FOS will be easily fobbed off with the lower sum."
A pattern of "goodwill" payments offered to complainants has emerged which is specifically designed to throw customers off the scent of a deservedly bigger payout. On average banks such as RBS are fobbing customers off with around £750 as a gesture of goodwill, when the average PPI claim handled can frequently triple this amount.
Plenty of lenders have been penalised for poor handling of PPI sales. Last October, Alliance & Leicester was fined £7m by the FSA for serious failings in its sales procedures. Others including Liverpool Victoria Banking services, GE Capital Bank and HFC Bank have also been forced to pay compensation.
The Competition Commission recently announced that the sale of PPI alongside loans and credit cards would be banned in 2010. It was also announced that lenders will have to wait at least seven days before they can make contact with a customer to subsequently offer them PPI insurance.