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Bank fails to tell all victims mis-sold payment protection insurance how much compensation they will receive
HSBC could find itself in trouble with the Financial Services Authority after it emerged the bank will fail to meet a deadline for clearing its backlog of payment protection insurance (PPI) mis-selling complaints.
Six banking groups, including HSBC, were given until midnight on Wednesday to resolve PPI mis-selling claims that were put on hold during the long court battle over the way people's complaints were to be assessed.
It is understood HSBC will miss the deadline because it has failed to tell all its affected customers whose claims have been successful how much compensation they are to be offered. There was speculation that another bank may be set to miss the target by a very small amount.
The FSA has already warned it is "not afraid to take tough action" against any firms that do not deal appropriately with complaints. Consumer body Which? said any banks failing to meet the deadline should be punished. However, HSBC may be hoping that its pledge to have all its cases sorted out by the end of this week means the regulator will take a lenient view.
The six banks – HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland, the Co-operative Bank and Egg – were granted the temporary extension by the FSA to ensure their backlogs of complaints were handled properly.
Many firms had decided to put some or all of their PPI cases on hold when the banking industry mounted a legal challenge to the FSA's new complaint handling measures. The banks abandoned their challenge in May, opening the way for millions of people to receive compensation totalling billions of pounds.
It is understood that the banks were supposed to send out letters telling people whether their complaints had been upheld or not, and, in the case of those individuals who were successful, at the very least provide information about how much money they were likely to receive. The redress is typically taking the form of a refund of premiums paid plus interest.
HSBC has been sending out these "decision letters", but some have not contained all the necessary information about redress.
In a statement to the Guardian, a bank spokesman said: "Over the past 12 weeks we have been in weekly contact with the FSA over our processing of customer PPI complaints. We have already written to all customers whose complaints were on hold due to the judicial review with a decision on their complaint, and will have communicated the final redress amount to all customers with an upheld complaint by the end of this week."
He claimed the regulator was "supportive of our approach", though it was not clear whether the FSA shares this view.
Earlier this year it emerged that while Lloyds Banking Group had put aside £3.2bn for compensation, HSBC had made provisions for £270m.
Banks and other companies have had to look back at past PPI sales, even where people have not complained, and contact customers if necessary.
With the FSA deadline now looming, Which? executive director Richard Lloyd said: "There's no excuse for banks not to have cleared the backlog of complaints caused by the judicial review. Any firms that have not met the 31 August deadline should face tough enforcement action."
He added: "The FSA should require banks to be more transparent about their complaint-handling processes, to show they are improving the way they handle customer disputes. Anyone who thinks they were mis-sold PPI should contact their bank immediately and, if they're not happy with the response, go to the Financial Ombudsman Service."
Those who think they were mis-sold a PPI policy – perhaps because they were told the insurance was compulsory or were not asked about pre-existing medical conditions – and have so far taken no action should complain first to their bank or loan provider. If the complaint is not dealt with to their satisfaction within eight weeks, they can take their case to the Financial Ombudsman Service.
- HSBC
- Payment protection insurance
- Financial Services Authority (FSA)
- Insurance
- Banking
- Regulators
- Financial sector
Rupert Jones
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