The number of claims concerning Payment Protection Insurance (PPI) has dropped for the first time in years according to the latest figures from the Financial Services Compensation Scheme (FSCS).
In the 2013/14 tax year, the FSCS dealt with 12,000 claims compared to around 19,000 the previous year. In total it paid out £243m in compensation, protecting more than 34,000 people who could not get redress from their lender.
A financial claim safety net
These claim figures and compensation amounts may seem low, but that’s because the FSCS only deals with financial claims where the lender has gone bust. It is a safety net for mis sold consumers who would otherwise have no hope of getting their money back. The number of Payment Protection Insurance claims handled by the FSCS only makes up a small portion of the total number of PPI claims being made in the UK, with the majority being processed and paid out by banks themselves. Many of which used a ppi calculator to worth out their refund.
Since 2001, the FSCS has paid out billions in compensation to over 4.5m people but in 2013/14 it saw an overall fall in the number of financial claims in received. The Scheme received around 39,000 new financial claims compared to 62,000 the year before. These claims can be about anything from PPI and mortgages to bank account fees and savings products.
PPI claims management companies proving popular
Although the total number of PPI claims received by the Scheme dropped, the number of claims that are PPI related compared to non-PPI claims actually rose from 30% to 37.5% suggesting other financial claims dropped off more severely than PPI. Over two-thirds of the PPI claims received by the FSCS came through claims management companies.
About the FSCS
The FSCS is funded through a system of levies imposed on financial institutions, the idea being that the money is there for consumers should that lender go bust – it’s like an insurance product.
In 2013/14 the levies totalled £1.1bn compared with £726m in 2012/13, but the amount is subject to change depending on how well the FSCS does its job. As part of its commitment to reducing costs for levy payers it recovered £353m from the estates of failed firms during the year, meaning existing banks pay less of a levy.
Speaking about the Scheme, FSCS Chief Executive, Mark Neale, said: “The FSCS is there for consumers when authorised financial services firms go bust. Last year we paid out more than £240m in compensation to people that might have put their savings into a credit union that failed, had a PPI mis-selling claim, or might have been given bad investment advice.”