Banks abandon PPI legal battle

| May 9, 2011 | 0 Comments
Banks abandon PPI legal battle

The British Bankers’ Association (BBA) has today said it will not appeal after losing the court challenge over claims they mis-sold payment protection insurance (PPI).

In a statement the BBA said: “In the interest of providing certainty for their customers, the banks and the British Bankers’ Association have decided that they do not intend to appeal.”

The announcement paves the way for billions of pounds to be paid out in compensation to several million people.

The controversial insurance has been a hot topic for sometime now and the Financial Services Authority (FSA) introduced a review of the insurance after millions of policies were mis-sold and thousands of complaints were received.

Last month the High Court ruled that the banks had to abide by the new rules of the FSA, which meant they had to review all their past sales to see if customers have a claim for mis-selling.

Under a PPI policy, an agreed sum of money is paid out each month to fully cover, or cover a percentage of the payment due on your mortgage or loan if you are unable to work, as a result of becoming unemployed or sick.

It was established last year that financial providers commonly boosted their profits by incorporating the cost of a one-off PPI premium into a loan.

Furthermore, many complaints were received after borrowers with PPI found themselves paying extra interest, while a significant number complained that they were unaware of having taken out the insurance policy.

The Royal Bank of Scotland announced today it had set aside funds for compensation and it will be looking at customers’ complaints, while Barclays Bank said it had set aside £1 billion to pay compensation. Banking giant Lloyds said it has made a £3.2 billion provision for claims.

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