Borrowers who were mis-sold Payment Protection Insurance (PPI) received £215m in refunds in the first half of the year as lenders started processing the huge backlog of complaints from one of the worst ever financial scandals. However, the pay-out is only a tiny fraction of the £7bn-plus banks have set aside to cover the estimated final bill for PPI refunds.
The Financial Services Authority revealed on Tuesday that almost half of the £215m was paid out in May and June – the months immediately after the banks said they would start honouring claims. In total 16 firms, representing 92 per cent of the claims processed in the first six months of the year, paid out £102m in those two months, £65m of which was in June. Consumer groups expect a further surge in pay-outs in the second half of the year as banks, inundated with claims, have struggled to process them quickly. Some of the biggest culprits – such as Lloyds Banking Group, Barclays and Royal Bank ofScotland– have hired hundreds of staff to help work through the masses of complaints.
The furore over PPI came to a head in May after António Horta-Osório, the new chief executive of Lloyds, broke ranks with the industry by saying he would make a £3.2bn provision to settle PPI claims. Before that the industry had been fighting against new FSA rules that would change how PPI could be sold on a retrospective basis – and open the floodgates to claims.
Other banks were quick to follow Lloyds by making their own provisions. Barclays and RBS set aside about £1bn each, while HSBC and SantanderUKestimated their costs at £270m and €650m respectively. Hundreds of smaller lenders are also planning to make large redress payments. The FSA will track claims across the industry on a monthly basis to gauge the progress lenders are making in refunding customers.
Many banks put past claims on hold during their judicial review of the PPI rules, leaving them with a vast pile to process. The Financial Ombudsman recently said it had at least 100,000 cases to consider, while new cases were still arriving.
Sally Bowyer, Managing Director of leading claims firm, BrunelFranklin.com said: “We continue to see a huge increase in PPI refund applications as public awareness gradually rises. Cases of mis-selling are still coming to light; as people feel the financial squeeze and learn of the PPI refund successes of friends, family and colleagues, the upward trend in the number of people seeking refunds is likely to continue for the foreseeable future.”
Learn more about PPI refunds and find out if you could apply for a refund today! Visit the website www.brunelfranklin.com or call Brunel Franklin, free, on 0800 051 54 51