Failed firm could saddle FSCS with £45m PPI bill
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The Financial Services Compensation Scheme could face a £45m bill from potential mis-selling claims brought against Wilmslow Financial Services, which formerly traded as Freedom Finance plc.
The administrator’s report on Wilmslow Financial Services shows it has set aside £50m to cover claims for PPI mis-selling.
Wilmslow Financial Services was put into administration in May, but because it was regulated by the Financial Services Authority, the FSCS must pay 90% of any claims made against the firm, with no upper limit.
The trade and operating assets of Freedom Finance were sold to Moneio Limited in November 2009.
Shortly after the company’s name was changed from Freedom Finance plc to Wilmslow Financial Services as the Freedom Finance brand name was not bought.
Moneio and Wilmslow Financial Services share the same parent company European Financial Solutions, which still operates the Freedom Finance brand.
Between January 2005 and December 2008 Freedom Finance sold more than 16,000 PPI policies and received 2,000 claims for mis-sold PPI policies.
The administrator’s report says: “Whilst non-preferential creditors total £50.50m, it includes an estimated worse case scenario PPI claim liability totalling £50m.”
But it says it expects the liability to be lower than £50m because to date claims have been made against only 10% of the policies that were sold.
But a spokeswoman for the FSCS says it is too early for it to speculate on the total compensation it may have to pay and whether this will lead to an increase in its fees.
She says: “We are aware of around 2,000 claims but expect to receive more.”
It expects PPI claims to account for around 20,000 FSCS claims during 2011/12.
European Financial Solutions was also the parent of Freedom Lending which later went on to become Wave Lending and Mortgage Intelligence and Mortgage Next before they were bought by Countrywide in May.
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