High street banks could face compensation claims of around £300 million if a mooted class-action case on loan-insurance policies proves successful.
High street banks could face compensation claims of around £300 million if a mooted class-action case on loan-insurance policies proves successful. This legal challenge focuses on customers who have allegedly been mis-sold a form of loan protection insurance called PPIs.
Legal firm Clyde & Co has issued pleas to 163,000 individuals who it believes have been wrongly sold personal payment protection (PPI) on loans. These were sold to offer protection for loans issued by sub-prime lender HFC which is owned by banking giant HSBC.
PPIs were sold on the premise that they offered protection should the policy holder become unemployed or fall ill. However Clyde & Co believe around £10 billion of policies was mis-sold in what is rapidly becoming the biggest scandal in the personal finance industry.
It is argued that overly ambitious sales people unfairly told customers that they would be unable to secure a loan without a PPI. HFC has already been fined £1 million by the Financial Services Authority for failing to check the mis-selling of PPIs.
Clyde & Co requires 500 people to mount the action and Julian Connerty from the firm said that the issue "could be more extensive because the FSA investigated transactions over a two-year period. It doesn't mean to say that people who bought PPI from HFC before, say five years ago, would not have been mis-sold".
However, FISA, the loan industry's self- regulator, has urged that placing restrictions on the sale of PPIs would actually negatively affect customers. FISA has backed increased information for borrowers but said that the Consumer Credit Act (CCA) already offers sufficient protection.
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