British regulators are currently working on setting the date by which consumers must be paid.
At the end of last week, British regulators announced that they would likely be starting to work on setting a deadline by which insurers would be required to compensate consumers who were improperly sold loan insurance products.
It is expected that the refunds from this process will be costing the banking industry billions of dollars.
The Financial Conduct Authority, which is the agency responsible for the oversight of the financial industry in Great Britain, has now said that they predict that their review of the loan insurance scam will be completed by the end of the year. From that point, consumers will likely have an additional two years in which they can file for compensation for having been mis-sold payment protection insurance. This means that the earliest that the deadline for compensation could be is in the early part of 2018.
Banks have been urging regulators to provide them with a deadline for filing loan insurance complaints.
Over the last four years, the complaints with regards to the payment protection insurance that was improperly sold to consumers has cost the banks approximately $31 billion. The issue has to do with a very long running scam in which policies had been sold to consumers in an inappropriate way. This includes the two decades leading up to and including 2010. During that time, banks in the United Kingdom sold 45 million policies that were supposed to protect consumers who were applying for credit cards, other types of loans and taking out mortgages.
The type of insurance policy involved in this scam was supposed to help consumers to be able to make the payments on these debts if they should ever be rendered unable to do so due to the loss of a job, contracting a debilitating illness, or certain other unexpected circumstances.
However, it was discovered by the Financial Conduct Authority that the complexity of the pricing and the details for payment eligibility for the loan insurance policies actually make this product inappropriate for a certain range of consumers – many of which were sold the policies regardless of the fact that it was inappropriate for them. In 2001, the agency sued the industry over this issue and the banks chose to accept a settlement with the government.