FSA sets out £4bn bill for firms who mis-sold PPI

FIRMS providing payment protection insurance (PPI) could be forced to pay out more than £4 billion to victims of mis-selling after the City watchdog revised its redress estimates.

The Financial Services Authority (FSA) yesterday said the cost of compensating customers who have not yet complained but could be identified as having been mis-sold PPI could reach 3bn, while redress for those who have already complained could cost between 700 million and 1.2bn over five years.

But the FSA's proposals for redress and complaints assessment, set out last September, are set to be revised after they attracted fierce criticism from the industry.

The FSA proposed that PPI providers review sales made since 1 July, 2007, and compensate customers who were mis-sold. It also recommended firms re-assess all previously rejected complaints dating back to January 2005.

But while consumer groups supported the proposals, the FSA said response from the PPI industry had been "highly critical". The watchdog has now revised some of the original financial assumptions and extended consultation by six weeks.

Dan Waters, director of conduct risk at the FSA, said: "We're disappointed the industry has responded so critically to our proposals but we remain committed to bringing about genuine, lasting change in the PPI market."

Waters said the FSA had taken enforcement action against 23 PPI providers, and added:

"We remain firmly of the view that the PPI market is broken and needs to be fixed."