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Banks pay out £215m for PPI mis-selling

By Martin Fagan - news@consumerchoices.co.uk

Banks shamed into paying compensation have doled out £215m from the £7.4bn set aside for PPI mis-selling claims.

Thousands of consumers who were mis-sold Payment Protection Insurance (PPI) and applied for compensation have been awarded £215million in the first six months of 2011, according to the Financial Services Authority (FSA).

The FSA data shows 16 firms, representing 92% of PPI complaints received in the first half of 2011, have paid a total of £215million in redress between January and June 2011. The remaining 8% of compensation was paid by around 400 smaller firms.

The regulator said it would publish monthly updates on how much PPI compensation is being paid and totals are expected to increase further.

Recent financial statements issued by the UK’s banks showed billions had been set aside to compensate customers who were mis-sold PPI. At £3.2billion, Lloyds' PPI compensation liability is the largest of any UK bank; Barclays said it has set aside £1billion, RBS £850million and HSBC £269million.

"The treatment of PPI complainants has left an indelible stain on the financial industry's record,” said Margaret Cole, interim managing director of the FSA's conduct business unit.

“By releasing these figures, we're providing a useful measure of firms' progress that can be tracked on an ongoing basis.”

Also welcoming the news of the scale of payouts so far, is the British Bankers’ Association (BBA).

It advised consumers seeking to claim PPI compensation to deal directly with the financial organisation that sold them the PPI or the financial ombudsman, and not a third-party claims management company that would charge fees.

Commenting on the FSA’s announcement, consumer watchdog Which? said that, although it welcomed the latest PPI compensation payouts, more still needed to be done.

"Over £200million in six months sounds like a lot but, when you compare it to the £7.4billion that the banks have set aside to cover PPI mis-selling, you can see that this is just the start,” said Richard Lloyd, executive director at Which?

"Anyone who thinks that they were mis-sold PPI should contact their bank immediately and, if they're not happy with the response, go to the Financial Ombudsman.”

PPI was sold to consumers on the back of mortgages, loans and credit cards and claimed that, if the insured individual was unable to meet their financial commitments because of illness, incapacity or redundancy, the PPI policy would make payments on their behalf.

However, PPI small print was riddled with exclusions which meant the vast majority of claims were unsuccessful. Moreover, the insurance had been knowingly sold to people who were either ineligible to claim, such as self-employed and people with pre-existing medical conditions, or people who had no income to protect, such as the unemployed and retired.