The U.K. financial regulator is in talks with a banking association to limit how long consumers have to file payment-protection insurance claims, for which banks have reserved more than 9 billion pounds ($14.3 billion).
The U.K. Financial Services Authority will consult with the public before changing its rules on PPI claims, according to an e-mailed statement today. The British Banking Association has offered to fund an advertising campaign to explain to customers how to complain about illegally sold PPI in return for a cut-off date for compensation claims, the agency said.
“Our key priority is to ensure consumers are protected, so the FSA Board would need to be convinced that any proposals would be in the interests of consumers,” the London-based FSA said.
The BBA lost a 2011 court challenge of the FSA’s guidelines on how lenders should handle consumer complaints over payment- protection insurance, opening the door to claims over past PPI sales. Around 95 percent of payment-protection insurance policies were sold inappropriately, said Martin Wheatley, the U.K.’s chief markets regulator, in a speech last year.
The BBA wants “to ensure that where customers have been mis-sold that they should receive all the compensation that they are entitled to,” the group said in an e-mailed statement.
The insurance is used to cover payments on credit cards and mortgages in case of illness or unemployment. Customers who bought PPI rarely compared prices and terms or switched providers, and usually weren’t aware they could have purchased it from other companies, the U.K.’s Competition Commission has said.
PPI generated as much as 5.5 billion pounds in annual revenue for U.K. banks in 2011, with about 6.5 million policies sold in 2006, the FSA has estimated.
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