FSA to force banks to write to customers

In another twist to the PPI scandal, the Financial Services Authority (FSA) is expected to instruct banks that they will have to write to customers who may be eligible for payment protection insurance (PPI) compensation.

The move, which is thought likely to lead to £3bn worth of additional claims, will see the FSA tell the banks what to put in the letter and will instruct them to use language which is clear and jargon-free, inviting them to claim compensation.

The FSA is concerned that while banks had to contact affected customers when they had identified “systemic problems in sales processes”, this did not mean that all those who received PPI have been contacted. It says that, while mainly of the claims which stemmed from the time of the judicial review have now been dealt with, attention has turned towards those customers who were mis-sold PPI but who have not complained and it believes that payouts from this process could well exceed the £2bn which has been paid out so far.

The Financial Ombudsman Service last week said that PPI continued to be the issue on which it had received the most complaints, receiving 46,000 such complaints in the second half of last year, and added that it expected there to be a significant rise in PPI claims in 2012.