Breaking News
Published 15/08/11
Since all the major High Street banks finally gave up their fight against claims from customers mis-sold payment protection insurance (PPI) in May, they have been flooded with complaints.
PPI is designed to cover repayments on a loan, mortgage or credit card after borrowers fall ill, have an accident, or lose their job. But it was widely mis-sold and the banks are now swamped with claims.
This is the latest scandal to hit the banks and cause further damage to their sorry reputation as they tried to dodge an estimated £9 billion payout to compensate customers.
Barclays is allowing for a possible £1 billion compensation bill, HSBC has made provision for £269 million and RBS has added £850 million to the £200 million it has already paid.
Meanwhile Lloyds Banking Group set aside £3.2 billion to cover its likely claims.
Under Financial Services Authority (FSA) rules, they have eight weeks to deal with claims. But in June the FSA gave the banks more time to deal with the backlog of complaints and the huge number of new claims still to come through.
So claims already with the banks must be dealt with by the end of August while any complaints received after the High Court review at the end of April, but on or before 31 August will be handled within 16 weeks. Those that come in on or after 1 September and before the end of 2011 must be responded to in 12 weeks. This is a temporary extension to ensure the banks can handle complaints properly and fairly.
PPI has long been criticised for being over-priced, filled with exclusions, and routinely mis-sold to people who have no hope of ever being able to make a successful claim.
The banks fought hard to avoid paying out compensation for mis-selling PPI but they gave up shortly after they lost a High Court ruling at the end of April.
The move has been dubbed a major victory for the thousands of potential claimants who were mis-sold PPI, as all cases which were put on hold at the beginning of the High Court case in October 2010 will now be re-opened, and new cases will be accepted.
