Store Cards Linked To PPI ScandalAug 28, 2017
There is nothing us Brits enjoy more than a bit of retail therapy, but according to The Times even this favoured past time may not have escaped the biggest banking scandal ever - Payment Protection Insurance.
"Thousands of shoppers with store cards from companies such as Debenhams or Mothercare may be entitled to compensation for mis-sold insurance.
Consumers who took out store cards as long ago as the 1980s may have been given payment protection insurance (PPI) without their full knowledge. Many are unaware that they could be entitled to payouts, industry figures warned yesterday.
PPI is Britain’s biggest mis-selling scandal, costing banks about £22 billion, but most of the focus has been on insurance on loans or mortgages rather than store card credit. Compensation on store cards could produce a large bill because many of the sales date back more than a decade, so would be inflated by the 8 per cent annual interest that is applied to compensation payouts.
Banks and claims management companies are at loggerheads over PPI. Banks argue that claims companies are generating millions of pounds of false PPI claims from people who did not have a policy or who may have been sold the insurance legitimately.
Claims companies, which have made about £5 billion from PPI claims, say that they help thousands of people to claim compensation who might find it too difficult or time-consuming. Tensions are growing because the financial regulator is considering whether to impose a two-year cutoff for new PPI claims.
Banks have said that the scandal should be drawn to a close, while claims companies have threatened a judicial review if a deadline is imposed. The companies argue that vulnerable groups, such as the elderly, find it more difficult to claim compensation.
According to an investigation into the store cards market by the competition commission in 2006, PPI generated £135 million in annual revenues and customers’ take-up rate was 27 per cent.
Santander UK was one of the largest store card issuers after it bought General Electric’s store card business, which included the Debenhams and Laura Ashley cards, in 2008. It sold the business in 2013 to NewDay.
Santander deals with PPI claims on store cards in the same way as it does other PPI claims. However, store card customers of Santander and other providers can face complications if their cases date back to before 2005, when complainants did not have the right of access to the financial ombudsman.
The Financial Conduct Authority obliges banks to treat store card customers in the same way as any other PPI complainant."