British banks could be hit with a £5.1bn bill over the next five years for PPI claims over their misselling of payment protection insurance, as the estimates for the cost of compensating customers continue to rise.
Updated costs :
The Financial Conduct Authority (FCA) released its latest totals on monthly PPI Claim Payouts. July 2013 totals for PPI repayments was £528 million which brings the total of PPI Claims repayments made sine January 2011 to £11.5 billion.
The figures are collected from 26 firms and financial institutions that made up for 96% of all the Payment Protection Insurance complaints from last year.
UK PPI Claims
Major UK banks, including Barclays, HSBC and Lloyds Banking Group face having to pay out hundreds of millions of pounds as claims against them relating to the PPI scandal mount, according to research by US investment bank Morgan Stanley.
Lloyds is thought to be the bank most exposed to PPI claims and Morgan Stanley estimates its potential liability at £1.5bn, while analysts at Credit Suisse earlier this week said it faced a £1bn bill from the scandal.
Morgan Stanley forecasts that in the worst case, the bill across the banking sector could hit £5.1bn over five years, £2.1bn more than the top estimate of the Financial Services Authority (FSA), which predicted in August a total cost to the industry of £1bn to £3bn.
According to the Morgan Stanley report, the lowest cost for the industry could come in at £740m; however the bank expects the figure to be at least £2.61bn, based on a likely success rate for compensation claims of 46pc.
Average payouts to successful claimants are £2,000, though some estimates put the figure at closer to £2,500 per claim.
In the worst case UK banks could end up paying £2.5bn to customers wrongly sold PPI, with the rest of the cost made up by fines and administration charges.
For instance, Lloyds faces a minimum bill of £220m, rising to as much as £1.53bn if the proportion of customers making claims were to reach 30pc of the total sold PPI and if the success rate for claims hit 50pc.
The recent publicity around the issue of PPI misselling is one factor that could contribute to a higher bill for banks caught up in the scandal, with approximately 12m policies still outstanding and roughly 20pc of customers likely to bring claims for compensation.
Earlier this month, Bank of America said it had set aside $592m (£374m) against claims over its sales of PPI, sparking renewed interest in how much other banks could have to pay to settle claims.
The British Bankers’ Association (BBA) has applied for a judicial review of how the FSA and Financial Ombudsman Service handle PPI sales complaints, arguing that they are judging the way they were sold by rules that were not in place at the time.
If the BBA is successful in its attempt it could cut the number of claims the industry faces by allowing banks that sold PPI to delay payouts, as well deterring new claimants.
A court date for the case is not expected until early next year, which will delay any payouts to claimants for several months.
The FSA has already brought 24 separate actions against firms for misselling of PPI and the fines levied exceed £22m.
Several major financial groups are among those fined by the FSA, ranging from US credit card company Capital One, which paid out £175,000 in 2007, to online bank Egg, which paid £721,000.
In June, the FSA published a package of measures aimed at protecting consumers and ensuring that they are treated more fairly in future.
PPI Claims News
Monthly PPI Payouts for 2013
Bankers should be charged, says 68% of Midlands residents
A recent survey of East Midlands residents revealed that 7 out of 10 ( 68% ) believe that Bankers should face criminal charges over fraudulenty selling Payment Protection Insurance or PPI.
The survey also goes on to say that 60% of Midlands residents would like to see the Government actually track down people who were mis-sold PPI and start the compensation prceedure before a personal complaint has to be made. 51% also suggested that living relatives of deceased victims of PPI mis-sellling should recieve the money made by the Banks and 25% agreed that in cases where releatives cannot be determined, the compensation should be given to charity.
FCA investigates Two Banks for mis handling PPI Claims
The FCA has confirmed that they are investigating two Banks for mis-handling PPI Claims. This comes after a report last week that the Financial Ombudsman (FOS) has seen an increase of PPI complaints being filed with them.
PPI complaints that are rejected by Banks are typically sent to the FOS for review. Our review of this last week pointed out that the FOS found that 8 out of 10 PPI complaints were upheld by the FOS. This has lead to the FCA stepping in to investigate the two main Banks that are rejecting valid PPI claims from customers.
PPI Claims – Leicester, UK
Maple Leaf Financial have a specialist team of solicitors dedicated to dealing with the mis-selling of payment protection Insurance (PPI) products by the banks in Leicester. We are happy to review these PPI products and to claim compensation for our clients where appropriate.
Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim
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