PPI payouts to soar as appeals reach 11,000 a week
Banks are to see compensation bills for one of the country’s biggest mis-selling scandals soar after the Financial Ombudsman Service today said customer complaints about payment protection insurance had more than doubled to 11,000 new claims each week in the final quarter last year.
The Ombudsman — which hired an extra 1000 staff to cope with the deluge of calls on PPI — received 145,546 complaints about the products in just three months between October and December. That’s more than the Government-backed service — which steps in when banks and customers cannot reach an agreement — received in any 12-month period between 2000 and 2010.
Banks have already set aside some £11 billion to compensate customers who were mis-sold PPI policies, which were initially designed to protect borrowers who lost jobs or became ill and couldn’t keep up loan repayments. Now lenders are expected to have to set aside hundreds of millions of pounds more to repay customers when bank-reporting season kicks off next month.
Britain’s biggest banks have had to pay out the most, with state-backed Lloyds Banking Group announcing a fourth PPI provision of £1 billion in November, taking the amount the bank has spent on the fallout to £5.3 billion. Bailed-out Royal Bank of Scotland added a further £400 million to its provision, taking its total to £1.7 billion. In October, Barclays conceded it would need to pay out a further £700 million on top of the £1 billion it had set aside in 2011 and the £300 million it paid in the first three months of 2012.
Analysts forecast banks will be forced to pay out in excess of £15 billion for PPI mis-selling.
This month, banking lobby group the British Bankers’ Association contacted the Financial Services Authority to impose a deadline on claims. The banks warn that the ongoing PPI claims and resultant costs are creating uncertainty for investors. The Ombudsman has had 604,550 PPI complaints between 2000 and 2012, and it is at present upholding 62% of complaints in the customer’s favour.
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