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Compensation paid to consumers who were mis-sold Payment Protection Insurance (PPI) reached a record £379m in November, compared with £268m in October.

PPI was routinely sold alongside loans to protect re-payments if the customer fell ill or became unemployed, but many people were sold policies that were invalid because they did not meet the qualifying criteria.

Lenders were under commission for every PPI policy they sold which led to some salespeople misleading customers by telling them that the loan would not be authorised unless PPI was taken out.

Millions of consumers were mis-sold PPI and it is estimated that up to £9bn will be paid out in compensation.

The number of PPI complaints received by the Financial Ombudsman Service (FOS) increased by 10 per cent to 55,907 in the final three months of 2011, compared with the previous quarter.

In November the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) launched a joint consultation on how to prevent the problems associated with PPI being repeated in the replacement products being brought to market.

The consultation closed on 13 January 2012 and specialist Lloyd’s insurer, Jubilee, is pressing for the two agencies to provide regulatory certainty in order to allow the PPI market to grow.

Jubilee’s head of personal lines, Chris Biles, said: “Anything which helps to clarify the responsibilities of both distributor and insurer has to be welcomed.

“But the FSA and OFT must recognise that there is a clear role for both lenders and insurers in helping to ensure that borrowers have access to appropriate ways of reducing the risk of being unable to maintain financial commitments.

“The key will be that any solution is designed to be easily understood and matched to the specific needs of the customer.”

Hedge fund manager David Einhorn and his fund Greenlight Capital were fined 7.2 million pounds ($11.2 million) by the U.K.’s Financial Services Authority, Bloomberg TV’s Dominic Chu reported.

The FSA said that Einhorn’s fund traded stock in Punch Taverns PLC on inside information back in 2009.

According to Sky News’ Mark Kleinman, Greenlight sold shares of the pub and bar operator just three days before Punch Taverns revealed plans to raise £350m from investors. 

Kleinman added that Greenlight had pared back its stake in the company several times before the announcement was made.

Einhorn is known for seeing problems at Lehman Brothers and publicly shorting the stock before the bank folded.

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Insurance firms Direct Line and Churchill have been fined for making alterations to files before submitting them to the Financial Services Authority (FSA).

In 2010 the regulator asked for 50 files to be submitted so that it could assess how the firms handled customers’ complaints.

The request was part of an ongoing inquiry by the FSA into financial firms’ complaint procedures.

Before the files were submitted, managers at both Direct Line and Churchill appointed external accountants to review a sample of complaints, and were advised that 28% were not likely meet the FSA’s required standard.

The two companies therefore instructed staff to check that the closed complaints were completed properly but this led to inappropriate alterations being made.

It was discovered that one employee had forged the signatures of colleagues in an effort to improve the data.

Although the changes were found to be minor and were not to the detriment of customers, the FSA imposed a £2.17m fine on the firms.

Tracey McDermott of the FSA said: “The firms’ management did not know what changes had been made or when [but] it is of critical importance that material provided to the FSA must reflect the picture as it is – not as they might like it to be.”

Paul Geddes, CEO, RBS Insurance said: “We very much regret the findings of the FSA investigation”.

RBS Insurance, which includes Green Flag and Privilege brands as well as Direct Line and Churchill, is being sold by RBS under European regulations.

Earlier this month the company appointed Rick Vlemmiks as chief marketing officer to oversee the restructuring of its insurance brands in order to strengthen their individual identities.

Mr Vlemmiks was formerly commercial director at British Gas.

Complaints to the Financial Ombudsman Service (FOS) from consumers who were mis-sold payment protection insurance (PPI), increased by 57 per cent to 30,301 between October and December 2010, compared with the previous three months.

PPI complaints now make up 54% of the FOS’s workload.

The FOS, which only deals with PPI complaints that financial firms have failed to resolve, ruled in favour of the customer in 68 per cent of the cases it dealt with in the final three months of 2011.

This is a significant fall from between July and September 2011, when it ruled in favour of the customer in 92 per cent of cases.

Millions of PPI policies were routinely sold with mortgages, loans and credit cards from the 1990s.

The insurance is designed to meet credit payments if the policy holder is unable to pay due to illness or unemployment, but millions of people were sold policies that were invalid because they did not fulfil the qualifying criteria.

Some policies were sold to people who did not need them and many people did not realise that the insurance was optional.

For years the banking industry refused to admit that PPI had been mis-sold, but was forced in May 2011 to adhere to the Financial Services Authority’s (FSA’s) demand that past sales of the policies should be reviewed.

The FSA also said that future sales of PPI should be much more strictly regulated.

Earlier this month the FOS said it was disappointed at the number of customers still waiting for financial companies to deal with their PPI complaints.

It is considering introducing a fee of £350 for dealing with PPI cases, which firms would have to pay in addition to a £500 standard case fee.

The Financial Conduct Authority (FCA) is one of the successor agencies to the Financial Services Authority (FSA) and is currently expected to be established by end-2012.
The FCA’s focus will be to regulate both wholesale and retail financial firms providing services to consumers and to maintain the integrity of the U.K.’s financial markets.
The authority will have [...]