Barclays increases provision for PPI claims to £2 billion

| October 18, 2012
Barclays increases provision for PPI claims to £2 billion

Barclays has set aside another £700 million to cover claims for mis-sold payment protection insurance (PPI) after claims reached unexpectedly high levels.

This is on top of the £1 billion set aside in 2011 and the £300 million provision made in the first three months of 2012.

By the end of September, the bank had already paid out £1.2 billion in compensation.

The news of the increased provision caused Barclays shares to fall by 1.5 per cent.

In total, UK banks are expected to pay out £15 billion in compensation to customers who have been mis-sold PPI.

For years, financial firms routinely sold PPI to customers taking out personal loans or mortgages.

The insurance is designed to cover repayments if the customer is unable to pay because of a change in circumstances such as ill health or unemployment.

However the product was often sold without checks being made to ensure it would meet the customer’s needs and that they were eligible to claim on the policy.

The Financial Ombudsman Services (FOS) received 66,882 new complaints about PPI in the three months to the end of September, taking the total received since April to nearly 100,000.

Banks have complained that claims management companies are pushing up the number of complaints by submitting bogus claims from customers who have never taken out PPI.

Claims management firms Gladstone Brookes and Consumer Finance Claims have been ordered by the Advertising Standards Authority to change their advertising.

The two firms were found to have suggested that a claim for PPI compensation was more likely to be successful if the claim was submitted through a claims management company.

Their advertising also suggested that reclaiming PPI was a lengthy process.

Both the Financial Ombudsman Service and the Ministry of Justice have reassured customers that using a claims management firm does not increase the likelihood of a claim being successful.

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