PPI cases drive rise in compensation

The financial services safety net has seen a 145 per cent increase in compensation claims in the last year, driven by a wave of payment protection insurance (PPI) cases.
By The Newsroom
Published 7th Jul 2012, 07:00 BST

Nearly 97,000 new claims were made to the Financial Services Compensation Scheme (FSCS) during 2011/12, compared with just under 39,500 over the previous financial year, the body said in its annual report and accounts.

Some 84 per cent of new claims received by the FSCS, which protects customers in cases where firms have gone under, related to PPI in 2011/12, and it expects PPI claims to continue rising into 2013.

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More than two-thirds of new claims received by the FSCS in the last year related to Welcome Finance, which was declared in default in March 2011, having mis-sold a large number of PPI policies.

But the FSCS, funded by an industry levy, said that an “innovative” restructuring arrangement has meant the cost of claims was met by Welcome, saving the industry £40m so far.

Some £347m was paid out by the FSCS to more than 86,000 consumers during the last year.