Fair Fees: new PPI provider goes into default with FSCS

The Financial Services Compensation Scheme faces a fresh wave of payment protection insurance related claims after declaring loan provider Welcome Financial Services Limited in default.

The FSCS has said that the firm is unable, or likely to be unable, to pay claims against it in relation to what it described as a “substantial number” of PPI policies that it has sold since 2005.

The FSCS’ declaration on Welcome, which was the subject of 2,119 general insurance-related complaints to the Financial Ombudsman Service in the last six months of 2010, is likely to trigger a fresh rash of compensation claims.

The FSCS said that it is aware that Welcome, which says on its website that it is no longer offering new loans, sold a substantial number of PPI policies to its customers.

The upsurge in PPI compensation cases has fuelled the rapid rise in general insurance brokers’ FSCS levy over the past two years.

A declaration of default opens the way for customers, and any others who might have claims against the firm that are protected by the FSCS, to claim compensation for claims submitted on or after 14 January 2005.

It does not cover claims for compensation for PPI business conducted by the firm prior to that date.

As part of the restructuring of the Cattles Group, including Welcome, has agreed to make payments to the FSCS to help cover the cost of compensation payments and the costs associated with handling claims.

FSCS chief executive Mark Neale says: “Today’s announcement paves the way for the FSCS to compensate consumers who were mis-sold PPI policies by Welcome on or after 14 January 2005.

“The FSCS will be making arrangements to contact all policyholders who were sold PPI by Welcome after 14 January 2005, and will work as quickly as possible to process any claims received. To help us achieve this we have arranged to use WFSL’s claims handling resources to deal with claims which will result in the faster resolution of claims. Policyholders can be assured that the FSCS will remain responsible for all decisions on claims, which will be made in accordance with FSCS rules.”

Under the FSCS’ rules, the compensation scheme is only triggered when it has declared firms in default.

Insurance Times’ Fair Fees campaign is seeking to reform the FCSC to give brokers a fairer deal. Click here to sign the online petition.