Co-Operative Fined Over PPI Mis-Handling.

by Mark Johnston

Co-Operative Fined Over PPI Mis-Handling.

Apparently payment protection insurance (PPI) is the most complained about product that the Financial Ombudsman Service (FOS) has ever seen.

Complaints about the payment protection insurance (PPI) mis-selling scandal are continuing to surge beyond all expectations and many analysts believe that the total industry wide bill will easily reach around £15 billion.

Figures have already shown that across the financial service industry, between January 2011 and October 2012, approximately £7.5 billion has currently been paid out in redress for mis-sold payment protection insurance (PPI).

There has been a huge jump in compensation payouts for payment protection insurance (PPI) since the British Bankers Association (BBA) trade body ended its legal battle in May 2011.

The legal challenge by the British Bankers Association (BBA) was over regulatory changes that would force lenders to refund past policies worth billions of pounds.

The Co-Operative bank has recently been fined £113,300 by the Financial Service Authority (FSA); this is due to the bank failing to handle some payment protection insurance (PPI) complaints fairly.

It seems that during, what is now the unsuccessful British Bankers Association (BBA) court challenge to the Financial Service Authority’s (FSA) rules regarding payment protection insurance (PPI) claims; the Co-op wrongly put a significant proportion of their 1,629 payment protection insurance (PPI) complaints on hold.

The problem with this was that the Financial Service Authority (FSA) made it clear that all firms ‘must’ continue to process claims where possible during the judicial review.

Tracey Dermott, the Financial Service Authority’s (FSA) director of enforcement and financial crime, said “we warned that enforcement action could be taken if claims were not processed”.

Many experts feel that this hold on claims was arbitrary put on by banking groups and was therefore a ‘dodgy’ delay tactic.

Martin Lewis the creator of, a comparison website, said that the Co-operative fine “shows that even mutual organisations have mis-behaved when it comes to payment protection insurance”.

A spokesperson for the Co-operative bank stated that “the bank recognises that during the relevant period it put some complaints on hold. Our strong reputation with in the banking sector has been built upon doing the right thing by our customers but in this instance our procedures have fallen short of the high standards rightly expected of us”.

It was however the banks first ever penalty from the Financial Service Authority (FSA) and in fairness no customers suffered any financial loss. Although the banks actions at the time did mean that many customers had their valid complaints delayed for no good reason.

Therefore the bank agreed to settle at an early stage of this particular investigation, thus meaning that they qualified for a 30 per cent discount on their fine and with out this discount the fine would have been £161,910.

It seems that in light of this particular fine it would not be surprising if this was not the first in a long line of fines for other banks that may have followed a similar pattern.


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