PPI reclaim costs could top £10bn, say bankers
by Luke Whitmore, 17th May 2011
The Co-Op Bank has put aside £90 million to cover potential
compensation for customers who were mis-sold PPI policies.
The announcement comes alongside suggestions from some analysts
that the PPI mis-selling scandal could end up costing the banks £8
billion - almost twice the £4.2 billion figure initially estimated
by the Financial Services Authority (FSA). Some banking insiders
have even expressed concerns that the cost of PPI reclaims could
end up in excess of £10 billion.
PPI, or Payment Protection Insurance, is an insurance policy
often sold alongside various types of loan, including mortgages and
credit cards. The purpose of PPI is purportedly to ensure the
financial security of the borrower by paying out if they should
find themselves in unexpected monetary difficulty, allowing them to
keep up the repayments on the loan.
However, over the past few years it became evident that many
people had been mis-sold unnecessary, expensive and useless
policies that were not suited to their situation. Some people even
found that PPI had been added to the cost of their loan without
their knowledge. The mis-selling scandal led to thousands of
customers reclaiming their PPI premiums after being victims of
mis-sold policies.
The outcome of a court case last month left the banks obligated
to retroactively apply the FSA's new PPI rules to their customers
and open up PPI refunds again. The banking industry was expected to
appeal against the decision, but after a shock decision from Lloyds
TSB to acquiesce to the FSA's demands, the desire of the other
banks to keep fighting appeared to collapse, and they announced
that they would not be taking any further action.
Lloyds ended up making a provision of £3.2 billion for customers
making a PPI reclaim. Barclays has set aside £1 billion, RBS
ringfenced £850 million and HSBC has put aside £268m.
If you have been mis-sold PPI, we can help you make a PPI claim
today.
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