Banks are set to escape PPI fines

Although banks have paid out the accumulative cost of £20 billion in compensation, it has been revealed that British banks are unlikely to face hefty fines for mis-selling loan products as the financial watchdog is more concerned about how banks treat their customers.

The big banks have paid more than £14 billion to customers who were mis-sold Payment Protection Insurance (PPI) and have set aside a further £6 billion, easily making it the country’s costliest mis-selling scandal. However, the banks look as though they are set to escape heavy regulatory fines for the mis-selling of PPI and products alike which occurred mainly between the years 2005 and 2009, after the Financial Conduct Authority (FCA) said their top priority is to ensure that victims are paid compensation fairly and quickly.

Tracey McDermott, the FCA’s director of enforcement and financial crime commented: “The decision we have made is to focus on the here and now, rather than going back to 2006 and 2007 to penalize people for what happened historically.” Adding “Going back to the historical selling at this point seems to serve little purpose, we want people’s time and attention to focus on doing the right thing at this point.”

Fines imposed on financial firms in Britain last year were 20 times the amount levied in 2008, suggesting that PPI offenders would be hit hard at some point.

However, as the FCA have a heavy workload, the assessment of how banks handle PPI complaints and their redress mechanisms is ‘a better use of regulators resources’ than going back to the original sales, McDermott said.

PPI policies were intended to protect borrowers should they be unable to make the repayments on their financial agreement, however, was mis-sold to many consumers.

Lloyds Banking Group have independently had to set aside almost £10 billion to compensate their customers for their part in the mis-selling scandal. However, the largest fine was issued to Alliance and Leicester (now part of Santander’s British arm) in October 2008.

Posted on Wed 30 Apr 2014