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FOS: Banks’ PPI payouts ‘nowhere near’ profits

Natalie Ceeney

The Financial Ombudsman Service says compensation payouts for payment protection insurance are “nowhere near” the profits banks made from the product.

Speaking to the Parliamentary Commission on Banking Standards today, FOS chief executive Natalie Ceeney said banks made far more money from the products than they are paying back in redress.

The current total amount set aside by banks stands at around £12bn but some have predicted it could hit £25bn.

Last month, the FSA said it was in talks with the British Bankers’ Association about imposing an April 2014 deadline on PPI claims.

Ceeney said: “Even the redress that has been repaid so far doesn’t come anywhere near the profits made over PPI.

“It is certainly true that if they tackled this earlier the bill would be far lower, without doubt. One of the disappointing factors for us is that this has been a long period of prevarication where they thought that if they could kick it into the long grass it would go away. Unfortunately there is now a big bill that needs to be repaid.”

Lord Andrew Turnbull said banks’ own ”idiocy” stopped earlier payouts, while Labour MP Pat McFadden slammed the “ludicrous” timescale for PPI compensation.

In response to PPI misseling, Ceeney said the Financial Conduct Authority needs to be more proactive and focus on different forms of redress other than fines.

She said: “We can’t simply wait until people complain, they will often complain many years after the event. Some indications from the FCA about how will it operate by looking at business models, incentive schemes, and penetration rates seem to be absolutely right. It’s the right direction of travel.

“One of the problems of the past has been to respond to a failing with a fine for a company. For many it is simply a small cost of doing business and the profits from continuing can be far in excess of the fine.

“We have been public about using enforcement action to put things right by enforcing proactive compensation or forcing firms to write to customers for proactive redress rather than waiting for individuals to complain. There is increasing use of it by the FSA and fines are not the only answer.”


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There are 7 comments at the moment, we would love to hear your opinion too.

  1. It’s funny how the FOS know the profits of the banks in relation to a particular product however the FSA as regulator doesn’t know who is in charge and responsible for decisions at the banks!

  2. No comment about the FSA failing to identify the banks sales techniques at an early stage and allowing them to carry on practising them for God knows how many years without detection.

    And no comment about FOS’s blinkered view that all sales of PPI were wrong regardless of who and how it was sold or how this sits with their supposed unbiased independence.

  3. RegulatorSaurusRex 31st January 2013 at 3:35 pm

    Silly girl, until there is a full review of PPI sold by banks they will stay in profit.

    Did she do sums at skool?

  4. Incompetent Regulators Award Team 31st January 2013 at 4:15 pm

    This is all front for politics. FOS know nothing about financial services and Ceeney even less. She has been placed there by gvt to deflect their very own financial failings. Gvt is to blame for everything and particularly the failed regulator with it’s incompetent and unaccountable staff.

  5. Is this really the same FOS that in 2007 during a meeting with CMC’s said that the number of complaints about PPI would be dropping off within the next 12 months and would be finished within 18 months??? This comment was met with howls of laughter from all present.

    And is this the same FOS that continually allow the banks more and more time to respond to complaints and to settle complaints and keep giving the stock answer ‘we believe they are doing all they can to clear the backlogs’!

    If the FOS believe the BS the banks give them and ignore the people that are telling them there is a problem, then there is little hope for anyone. I feel sorry for the small IFA’s that are getting caught up in this mess. As a CMC we deal with very few IFA sales and by IFA sales i mean genuine IFA’s, not car sales companies who jumped on the bandwagon of an easy sale. True IFA’s saw PPI policies for what they were – rubbish and expensive and only suitable for a very limited number of people.

  6. Whilst I have no sympathy for the banks and their outrageous mis-selling of this product surely the purpose of the FOS or indeed the company who sold the product is to put the client back in the position they were before they were mis-sold.

    If they are put in that position and the bank still made a profit is that not just the way business works?

    at Matthew Whiting 31/01/13 4.27pm
    As an IFA myself it’s nice to see that as a CMC you have some sympathy towards the IFA sector though this does not seem to stop the complaints coming in from CMC’s alleging mis-selling of PPI (often it is an ASU which is a completely different product or in fact as in a couple of instances it is a life and CI policy the client had).

    Yes everyone has the right to complain but the aggressive marketing tactics used by CMC’s including phone calls and texts encourages people to complain simply so because of their greed or that of the CMC when in fact they would be in deep if they didn’t have the plan and subsequently lost their job / off sick for several months with no other means of paying their mortgage.

    We have a client who has claimed 3 times on an ASU policy and been paid £7200 in benefit over 3 different 12 month periods yet the CMC involved has taken the case to FOS still suggesting that this was mis-sold. An exercise that now costs me £900 in additional FOS fees even if FOS kick out the claim. Given that we have received approximately £360 in commission over the years the policy has been in force I don’t see how the current system is either fair or helped by CMC’s and certainly in response to the allegation that banks have made more profit than they are paying out in redress then I don’t know how they managed that as we would be severely out of pocket even if the complaint is not upheld by the FOS

  7. Neil, i completely agree ASU and PPI policies are completely different policies, which is why IFA’s sell ASU and not PPI! As for the situation you have described I dont understand how this has gone to the FOS. Even if it were to be shown the policy was mis-sold the client is not going to receive any redress and the CMC is therefore not going to be paid (unless they have taken an upfront fee, which in itself is wrong and soon to be stopped). This situation gives good CMC’s (and I would argue there are some) an even worse name and does no one any favors, including the client.

    As for the commission you have received, this again shows the difference between a quality policy sold for the right reasons and a rubbish policy sold purely for commission – upto 80% commission on PPI sales – that is ridiculous – but you may have made some money if you had received that sort of commission!!!

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