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 claims.
Consumer groups expect a further surge in refunds 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.
Margaret Cole of the FSA’s conduct business unit, said: “The treatment of PPI complainants has left an indelible stain on the financial industry’s record.”
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 the insurance 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 refund payments.
The FSA will track claims across the industry on a monthly basis to gauge the progress lenders are making in refunding customers. “We remain 100 per cent committed to ensuring that where consumers were mis-sold PPI they will receive the appropriate redress from firms, and we are monitoring firms’ progress to ensure this is done properly. Where we find that this not to be the case, we are not afraid to take tough action,” said Ms Cole.
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. The FSA extended the period that banks had to deal with the backlog. The biggest lenders were given until the end of August to resolve hundreds of thousands of past complaints.
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. Horrendous 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.