Surge in PPI claims responsible for FSCS payout
The Financial Services Compensation Scheme (FSCS) forked out more than £204m in customer compensation last year - the bulk of which paid for payment protection Insurance (PPI) claims.
Two thirds of the compensation paid to 21,000 claimants during the year was for Payment Protection Insurance (PPI) and investment claims, its annual accounts showed today.
PPI claims have increased significantly during the year rising to more than 2,400 and the FSCS expects the numbers of claims in this area to continue to grow in 2010/11.
The surge in FSCS customer compensation has led to huge levys on brokers, despite little involvement in PPI, which led to Insurance Times launching its Fair Fees campaign.
The increase in investment claims came as a result of claims against brokers, many of these involved complex issues that the FSCS had to resolve.
It paid over 15,000 claimants, the majority of claims related to Keydata Investment Services Limited.
Over the year the FSCS also completed the validations of the amounts paid to fund the transfer of the depositors of Bradford & Bingley plc, Heritable Bank Plc and Kaupthing Singer & Friedlander Limited.
Recoveries of £1.06bn were made, which will be used to reduce the principal of the loans borrowed from HM Treasury for the bank failures of 2008/09.
The outstanding principal on the loans is due to be repaid from 2012; a repayment schedule will be agreed, based on market conditions, closer to the time.
The FSCS will also contribute to the cost of Dunfermline Building Society at the end of the resolution process, but the Scheme has made an initial provision of £400m based on the latest information available to it.
During 2009/10, the FSCS continued to work closely with the Tripartite Authorities to strengthen its ability to compensate consumers quickly in a wide range of eventualities.
This included working with the industry so that, from the beginning of 2011, the FSCS will be able to make payouts for deposit-taking failures within seven days. It will also launch a campaign in January to raise public awareness of the FSCS.
Mark Neale, FSCS chief executive said: “The FSCS achieved a huge amount in 2009/10. We completed a large number of claims, resolved outstanding issues from the banking failures, and made significant investment in response to the demands for faster payout and our increased responsibilities. The Annual Report and Accounts 2009/10 gives a detailed insight into the challenges the Scheme faced as well as its achievements during 2009/10.
"The report demonstrates the vital service the FSCS provides to consumers and the benefits that it brings to the industry in delivering consumer protection and promoting consumer confidence.”
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