FSA forced to delay payment protection insurance changes

Under immense pressure from the financial services industry the Financial Services Authority (FSA) has today confirmed that the consultation period regarding the potential mis-selling of payment protection insurance will be extended by a further six weeks. This is a blow to the consumer sector where a number of customers have already stepped forward alleging they were mis-sold payment protection insurance by various financial institutions.

There have been a number of changes to the initial FSA proposals to rectify perceived problems in the system but it is the revelation of a potential compensation bill between £700 million and £1.2 billion over the next five years which has shocked the FSA. It is also believed that customers who have not complained, but may well have been mis-sold payment protection insurance in the past, could be eligible for compensation in the region of £1 billion-£3 billion.

While there is no doubt that changes need to be made with regards to the payment protection industry and the way in which this insurance is sold, the FSA has been forced back to the drawing board by the power and strength of the financial services industry. It is likely that proposals at the end of the consultation period could be a significantly watered-down version of the initial plans.