Lenders have been told to ensure their letters offering payment protection insurance (PPI) compensation are clear, to prevent providers misleading victims.

The regulator, the Financial Services Authority, has today proposed guidance for how firms must communicate with customers.

Banks, building societies, credit card firms and other lenders must explain clearly why the customer may have been mis-sold, what the customer should do, and stress the need to act promptly.

It is estimated there is still another 7 billion of the 9 billion PPI mis-selling bill still to pay.

The FSA's action comes as firms begin to write to those they mis-sold PPI to as part of a systemic culture of misleading sales within their organisations.

This is a result of FSA rules introduced last year, which banks tried to derail, but failed following an embarrassing High Court defeat last May.

Don't wait to be written to

However, this doesn't mean they will write to everyone. If you believe you were mis-sold, you should still put in a claim yourself.

Martin Lewis, MoneySavingExpert.com creator, says: "Not everyone who's been mis-sold PPI will get a letter.

"Banks only need write to those who have been 'systemically mis-sold', yet there are many more individual cases.

"So don't wait. Check through all loans, credit cards and store cards you've had in the last 10 years to see if this insurance was added to it.

"If it was, the seller should've ensured it was appropriate. So if it lied and said it was compulsory, added it without you knowing, or you were self-employed or had a past medical condition when you got it, there's a good chance it was mis-sold.

"There's no need to pay a claims handler to reclaim, you can do it yourself for free. There's full help and free letters in the PPI Mis-selling guide.

"And for those who get a letter, act quickly on it. It's likely to trigger the start of a time limit within which you need to complain.And as many are due to get thousands back, in these tough times, the sooner it's in your account not their account, the better."

The proposed guidance states firms must ensure the letter:

  • Contains important information and states it should be read carefully.
  • States the customer may have been mis-sold.
  • Details the failings that led the firm to believe the customer may have been mis-sold.
  • States the customer may have suffered a financial loss and could be entitled to redress.
  • States it requires careful and immediate consideration and that there is a three-year time limit for making a complaint from receipt of the letter.
  • Is free from financial jargon or marketing material.
Martin Wheatley, FSA managing director, says: "So far, the majority of payouts have been for complaints received before, or put on hold during, the judicial review.

"However, we are now beginning to see firms considering how to treat customers who were mis-sold but have not complained.

By ensuring firms are clear about the problems they have identified and the potential redress due, we are aiming to prevent people running out of time if they choose to complain."

The FSA is consulting on its proposed guidance and hopes to have the final wording in mid-to-late spring.

On Our Forums

PPI letters