To date, the Financial Ombudsman Service (FOS) reports that it is receiving at least 1,500 complaints a day for mis sold payment protection insurance claims. The reports state that Barclays and Lloyds, two of the UK’s biggest banks, are now facing fire with over ten thousands of complaints. The Financial Services Authority (FSA) states that banking reforms and further regulation of banking incentive systems for sales representatives and brokers need to be made.
PPI is an insurance product designed to provide repayments for financial commitments should customers be sick or unable to provide income. It is usually sold with credit cards and loans and often given as a bonus product for customers with high credit scores and is free from repayments for a year. The millions of mis sold PPI makes it one of the biggest financial scandals in the UK to date.
Barclays has earned at least 19,000 claims for payment protection insurance. Lloyds TSB leads in count with 22,000 complaints. The two banks are part of the major banks who have provided a £9 billion compensation package for the entire United Kingdom, including major stakeholders HSBC and RBS.
The Financial Services Authority Managing Director Martin Wheatley states that banking reforms in its incentives systems and regulation is needed to ensure that the integrity of banks are restored. Previously, Barclays has been involved in a rate-rigging scandal involving Libor, which has shaken the foundations of UK’s banking companies. Wrong motivations for incentives, such as having customers purchase higher-priced financial products for bonuses, will be reformed and re-instituted with a new set of laws and regulations.
The Financial Conduct Authority, an authorized overseeing group, will be formed to regulate banking incentives and systems to ensure that customers are still getting a fair deal out of the financial services they receive to avoid financial scandals in the future.
