Two and a half million cases of PPI mis-selling to be reopened after claimants were denied compensation

By Adrian Lowery for

Hidden cover: Five million letters will be sent out to people who could have been mis-sold PPI without realising it.

Hidden cover: Five million letters will be sent out to people who could have been mis-sold PPI without realising it.

Two and a half million borrowers who complained about mis-sold payment protection insurance but were denied compensation will see their cases re-opened, the financial regulator revealed today.

The Financial Conduct Authority said lenders had agreed to re-open the complaints from 2012 and 2013 to make sure fair compensation was paid.

PPI was supposed to help policyholders repay loans and credit card debts in the event of illness, accident, redundancy or death - but widespread mis-selling since the late 1990s meant providers were forced by regulators to compensate millions of customers retrospectively.

The FCA said the industry had so far paid out £16bn of the £22bn they had set aside to deal with the consumer scandal.

The FCA said it was not satisfied that all PPI complaints received by banks in 2012 and 2013 had been treated fairly after the number of cases being won by customers fell.

It said banks had subsequently agreed to review cases which may have been unfairly rejected or where too little compensation may have been paid.

'Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where it's due, is an important step in rebuilding trust in financial institutions,' said the FCA's Chief Executive Martin Wheatley.

'In around two and a half million complaints this was not necessarily the case so, at our request, firms will be looking at these complaints again.'

Lloyds, Barclays and Royal Bank of Scotland increased the amounts they had set aside alongside their first-half results.

The FCA added that seven out of ten claims have been upheld in the consumer’s favour, and that the Financial Ombudsman Service has received over 1m complaints from people unhappy with the response from their provider – equal to about a quarter of all rejected complaints

Moreover, 3.2million letters have already been sent to people who are likely to have been mis-sold PPI but have yet to complain, with a further 2million to be sent in the coming months.

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