Many customers have been devastated by the recent PPI crisis. The banks have been heavily criticized for using aggressive and dishonest practices to promote the insurance. Major financial regulators have also received a lot of flak for failing to prevent it. The European Insurance and Occupational Pensions Authority recently stated that the regulators will need to scrutinize PPI much more carefully.
EIOPA Alleges Regulatory Failings
The EIOPA said that the United Kingdom’s financial regulator failed to properly oversee the PPI market. They said that there were serious problems with the state of the financial market and the regulator failed to ensure the proper consumer protections were in place.
Martin Wheatley, Chief Executive of the new Financial Conduct Authority, recently made a similar statement. Wheatley said that the Financial Services Authority failed to create the safeguards needed to prevent such a scandal from occurring. He said that the new agency will be dedicated to preventing financial crises beforehand rather than containing the damage after they arise.
The banks have taken a lot of heat for selling PPI to their customers. They have been trying to fix their reputations and resolve many of the complaints that were filed against them. The Financial Ombudsman Service (FOS) has also shown little mercy on the banks and upheld many of the complaints customers have filed.
However, some critics feel that regulators and the FOS may have gone too far. One customer said that he filed a complaint against his bank long before the scandal gained so much publicity. This customer said that the claim was valid, but is skeptical that all other claims should have been upheld. He believes that many customers may have actually needed the insurance.
Other people share his perspective. They think that some of the claims should have been denied. They are worried that upholding too many claims could eventually create financial risks for the banks. This could make them more reluctant to uphold legitimate claims.
Proper Oversight Needed
The FCA and the EIOPA both feel that these issues will need to be resolved as soon as possible. Wheatley said that his staff is going to be more stringent on overseeing the banks. Banks will be required to work educate customers on the process and teach them how to use a PPI claim calculator to determine the value of their claim.