Redress v Compensation

[stevesouth33]

A thought occurred to me today that I would be interested in others views of. There are lots of statements being made that banks are compensating customers for miss-selling of payment protection insurance. In reality though what the banks are doing is providing redress. There are many definitions of redress but I think merely refunding with simple interest is not compensation for the fact that they miss-sold a product to millions of customers who have then had to go through a bit of a nightmare simply to get a refund of what was wrongly taken from them.

Surely in this space there needs to be some actual compensation for wrong-doing as opposed to a refund? Is there any precedence for this does anyone know in any other financial or other miss-selling example.

Sounds like the banks 'borrowed' lots of money and now all they are doing is giving back the money plus a fraction of the interest they would have made on the money while they had it would have been compounded not simple.

Any views would be appreciated.

Steve

[Bill-K]

Re: Redress v Compensation

Back in the earlier days of penalty charge reclaims, there was an element of compensation where the banks repaid the charges with compensatory interest at the Contractual rate - and compound, not simple interest. This eventually became increasingly difficult to pursue, as the banks found more legal arguments against it. So we're now back to simple interest at the 8% Statutory rate for PPI reclaims - and even the way this is now being calculated with credit card PPI claims has now been whittled away by the FSA. The 8% S.I. is supposed to be 'compensatory,' in that it supposedly compensates the claimant for the loss of use their money, but hardly does so, IMO. 8% is a paltry enough rate, but where else in banking is simple interest used ?

Lord Nicholls in the Sempra appeal hearing said: "We live in a world where interest payments for the use of money are calculated on a compound basis. Money is not available commercially on simple interest terms. This is the daily experience of everyone, whether borrowing money on overdrafts or credit cards or mortgages or shopping around for the best rates when depositing savings with banks or building societies.If the law is to achieve a fair and just outcome when assessing financial loss, it must recognise and give effect to that reality."

The FSA/FOS say: "In the majority of cases, we are likely to tell the financial business to put the consumer in the position they would have been in if they had taken out all of the loans without any mis-sold PPI - and to compensate them if they have been out-of-pocket in the meantime." But the only compensation they award is the 8% S.I. - although if the firm has been difficult, they may direct that it pays a few hundred quid in compensation for that.

I am awaiting the FOS decision on a claim where several consecutive loans all had PPI refunded, and the claimant's current account suffered many penalty charges which would not have been made if the claimant were not paying for PPI. These penalties - and account interest on them - are being reclaimed on the basis that they are 'consequential loss' directly attributable to the PPI.