PPI bill hits £24.4bn

Posted by Rebecca Stains in Banking on 6 March 2015 - Rebecca worked as a Credit Analyst at checkmyfile until 2015

Payment Protection Insurance, or PPI, is designed to help people repay loans and credit card debts in the event of illness, accident, redundancy or death. However, the insurance was mis-sold to millions of people and when many of these situations arose, customers were not given the financial help promised to them. PPI was also mis-sold to people who simply did not want or need the insurance.

Compensation claims have led to an average pay out of just under £3,000 per person. The total bill of the five biggest banks in the UK has now reached £24.4bn, says consumer group Which?.

The financial ombudsman, which adjudicates on more complex cases, says the rate of claims has not slowed down as much as it had expected. The amount banks have set aside for PPI mis-selling has been revealed over the past few days. Barclays said its provision increased by £200m in the last three months of 2014, taking the year's total to £1.1bn. Santander added another £30m and Lloyds set aside a further £700m over the same period. RBS, which is majority-owned by the taxpayer, made an additional £400m provision, to bring the total for the year to £650m, while HSBC allowed an additional £278m taking its total for the year to £624m. This brings the total for 2014 to £2.2bn.

Richard Lloyd of Which? said, "Yet again banks are having to set aside more money to cover the staggering PPI mis-selling scandal. All banks need to make it as easy as possible for people to claim back their money so they are not encouraged to use unscrupulous claims management companies”.

Many thousands of compensation payments have already been made. The more complex and older cases tend to end up with the financial ombudsman service as information is more difficult to gather together. PPI accounted for two-thirds of all financial complaints dealt with by the service in the second half of 2014.

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