PPI scandal to cost banks £10 billion
The UK’s ‘big five’ banks have now paid out £8.8 billion in compensation to customers mis-sold payment protection insurance (PPI) and the eventual bill is expected to exceed £10 billion.
Administration and staff costs will send the bill even higher.
Banks are suffering an administrative headache in trying to sort out genuine claims from the thousands of ineligible claims sent in by PPI claims management companies.
UK banks are expected to increase the provision for PPI compensation in their interim financial results, with many having already done so.
Lloyds Banking Group, which has been hit the hardest by the scandal, has increased its provision for compensation to £4.3 billion, while HSBC has set aside £1 billion.
The total for the ‘big five’ – Lloyds, RBS, Barclays, HSBC and Santander – has now reached £8.8 billion, with claims still flooding in.
Consumer group, Which? has warned that PPI mis-selling is set to become the biggest financial scandal of all time.
It is calling on the government to tackle the problem of unscrupulous claims management companies, who send in compensation claims without checking if they are genuine.
Which? chief executive Peter Vicary-Smith said: “These latest figures from the banks show that PPI is now on course to become the biggest consumer financial scandal of all time, exceeding pensions mis-selling and the endowment mortgage scandal.
“The banks must make it straightforward for people to reclaim PPI themselves, for free, so they don’t resort to expensive and unnecessary Claims Management Companies (CMCs).
“We now need the Government to raise its game too, and toughen up the regulation of unscrupulous CMCs who are exploiting consumers who just want to claim back what is rightfully theirs.”
The Financial Ombudsman Service received 32,445 new complaints about PPI mis-selling between April and June, with an average of 1000 new PPI complaints being received every day.