Image copyright PA Media

Payment protection insurance (PPI) was mis-sold to nine out of 10 people who complained about their policy in final months before a compensation deadline.

PPI was designed to cover loan repayments when policyholders fell ill, had an accident, or lost their jobs.

Up to 64 million policies were sold, mostly between 1990 and 2010, but it proved to be the UK's biggest financial mis-selling scandal.

The City regulator said it had now been brought to an "orderly conclusion".

However, some cases remain unresolved and campaigners have argued that last summer's deadline to make PPI complaints came too early.

PPI policies were mis-sold to people who did not want or need them, or who would not be covered.

Banks, building societies and other credit providers have paid an astonishing £38bn in compensation to those who were mis-sold PPI and made a claim. The typical payout was £2,000.

'Jaw-dropping' compensation

Image copyright Michele Barker Image caption Michele Barker with the car she bought from her PPI compensation payout

Every time Michele Barker starts the engine of her car she knows that PPI fuelled her purchase. The 59-year-old, from Gravesend, had a PPI policy on a credit card for 20 years that would never have paid out.

After making a claim herself through the Resolver website, she was awarded compensation of £22,500.

"It was a jaw-dropping amount," she told the BBC last year, with the total bulked up by the interest that providers are duty-bound to add.

"I put some of the money towards buying a boring, new Vauxhall Corsa, and it meant my husband could buy a new van as his had been stolen."

The City regulator, the Financial Conduct Authority (FCA), has published a report into its awareness campaign about the PPI claims deadline of 29 August last year.

Following a late rush, this deadline was effectively extended to November.

In its report, the FCA said that 6.7 million decisions about complaints were finalised between July 2018 and November 2019. About 1.7 million of them (26%) were cases when people had not had a PPI policy.

Of the remaining five million, 87% were found to have been mis-sold their policy, leading to compensation payouts of more than £5bn.

Too early?

The report again revealed the extent to which claims management companies (CMCs) made huge batches of complaints on behalf of consumers. They took a cut of any payout.

Critics argue that CMCs were never needed because people could make their own claims, but the companies say many of these people would never have claimed at all.

The FCA report revealed that 92% of enquiries about whether somebody had a PPI policy were made by claims companies in the final months before the deadline, mostly in bulk spreadsheets.

Nearly half (45%) of cases that were full compensation claims were conducted through CMCs.

The banking industry lobbied the FCA hard to call a deadline to PPI claims, which the regulator eventually agreed to. Some consumer groups said that people could lose out on money they were entitled to as a result.

In its report, the FCA claimed its decision to set a deadline was appropriate.

"We consider that, overall, the PPI issue has been brought to an orderly conclusion in a way that has secured appropriate protection for consumers and enhanced the integrity of the UK financial system," it said. "This will help to rebuild public trust in the retail financial sector."