Banks and financial services companies have racked up more than £40bn in costs to handle the payment protection insurance scandal.
The costliest mis-selling bill in UK financial services history became even more expensive on Thursday after Barclays set aside a further £600m to handle the cost of claims.
PPI was sold alongside mortgages, credit cards and personal loans and was designed to cover payments if customers fell ill or lost their jobs. The policies were highly profitable for the banks but were often sold to customers without their knowledge or to people who were unable to claim, such as the self-employed.
The Financial Services Authority began imposing fines on banks for the mishandling of PPI in 2006.
Data compiled by the thinkthank New City Agenda shows that this top up for Barclays has pushed the total provisions incurred by the industry to £40.2bn. Lloyds Banking Group makes up £17bn of that total.
The size of the payouts have already been cited as a reason for booming car sales and holidays. As one penny off income tax costs about £4bn, it could be regarded as a boost to household income.
Not all the money has gone straight into consumers’ pockets. The latest data from the Financial Conduct Authority shows that from January 2011 – when claims started to be made – until the end of July about £25bn had been distributed by the banks and other firms which sold PPI.
Claims management companies have, according to the National Audit Office, received up to £5bn of the payouts. That’s £5bn that didn’t go back to the people who were ripped off…
The banks have also incurred billions of pounds of costs in handling the claims but they have not used all the money they have set aside in anticipation of more applications for compensation.
There will be many people that have claimed that did not get their money back; and sure as eggs is eggs, financial institutions will try their hardest to not pay the money back.
Wouldn’t it have been a good idea to have independent organisations review and automatically have funds returned without the need for a claim?
Or why not close down these banks and set up new ones, under new management?
Whatever we think about the PPI Scandal and our financial institutions, this isn’t the first time they’ll rip us off nor the last.
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