In 2007, UK Consumer Rights Group Which? had launched a compounded complaint from numerous consumers complaining that banks had sold them an insurance policy that they were ineligible for from the start. Upon this complaint, the Financial Services Authority had taken action and they had discovered that bank employees had dastardly mis sold the insurance in favour of higher commission.
It did not take long for the FSA to launch a formal discussion with banks about recognising the immensity of the financial scandal and that it needed their full support. Instead, banks launched a legal challenge against the FSA, which the latter won and had PPI claims made simple as banks became cooperative and the Financial Ombudsman’s weight had decreased, but not to a comfortable level.
Mis sold PPI had created a cultural impact in the United Kingdom. Claims management companies, which had sent unsolicited text messages and cold calls to many people, even children, inviting them to have the company represent them to make a claim, had its own share of highly successful and downright swindling stories.
The MOJ had revoked the licenses of hundreds of claims companies because of their upfront fees, misconstrued payment structures and false advertising.
Today, according to the Financial Services Compensation Scheme, PPI has not yet reached its peak. The FOS, which still receives 1,000 complaints daily, reports that it will have more on its plate despite a great reduction on claims from 264,000 the first half of 2013 to 190,000 the second half of 2013. Experts attribute this to the banks’ exploitation of a regulatory loophole called “alternative redress”, which issued a refund for a regular-premium PPI despite the consumer having bought a single-premium PPI.