Payment Protection Insurance redress had become industrialised, with claims management companies paying for high profile advertising campaigns to encourage potential victims of miss-selling to make a claim.
The Financial Ombudsman Service routinely found against the banks, who had to pay the Ombudsman fee whether they lost or won, and were essentially presumed guilty of miss-selling unless they could prove otherwise. Some claims went back decades, before computerised records, and paper records were sometimes impossible to trace. Claims became increasingly fraudulent, with at least one bank which had never sold PPI having to settle with people who claimed to have bought it off them. Pay outs mounted to billions of pounds a year. There was widespread consensus that the situation had spiralled out of control, but HM Treasury had little incentive to act, as the pay outs were popular with voters and consumer groups. The FCA would not introduce robust guidance without coverage from HMT.
The solution was a series of detailed negotiations at the top level with consumer groups, the Financial Ombudsman, the FCA and HMT, to reach an agreement that satisfied all parties: that banks would write out an agreed text to all potentially affected customers and pay for a high profile advertising campaign, in return for a deadline after which no PPI claims would be considered. The agreement finally brought to an end the PPI miss-selling saga, after banks had paid out more than £38 billion.