The Financial Services Compensation Scheme, which pays out when financial institutions collapse, has seen a massive increase in claims due to Payment Protection Insurance (PPI).
The scheme, known as the FSCS, received a 145pc increase in claims in the last financial year, and paid out £347m in compensation. It expects the PPI claims to continue to rise in the current year as people who were missold the insurance ask for recompense.
Many of the claims related to Welcome Finance, which sold 500,000 PPI policies but then became effectively insolvent, according to the FSCS. PPI claims related to Welcome Finance made up two thirds of the FSCS payouts this year.
In April 2011, UK courts ruled that consumers may reclaim mis-sold PPI which led to UK banks putting aside over £5bn to cover claims, while some estimates suggest the total bill for banks could be between £10bn and £20bn.
Mark Neale, Chief Executive, says: “The 2011/12 financial year continued to be a challenging one for FSCS. We dealt with a great number of complex issues across the financial landscape, and responded to these efficiently and effectively.”
“We play a powerful role in helping to underpin the consumer confidence that supports financial stability and benefits the industry. FSCS will continue to focus on providing the best possible service to consumers and the industry, against the backdrop of this challenging environment.”
During 2011/12 FSCS recovered a total of £759m from the estates of failed firms, including £673m for the major bank failures of 2008/09 and £30m relating to Keydata Investment Service Limited.
06/07/2012 - Telegraph.co.uk