The PPI claims scandal has become the biggest scandal to strike the financial industry. Customers throughout the country filed nearly half a million claims for payment protection insurance in 2012 alone. The Financial Ombudsman Service said that around 90% of those claims are upheld. They have cost the banks nearly £560 million. Individual claims can be calculated using a ppi calculator.
Cost of PPI Claims to Banks
- The payout for a payment protection insurance claim varies considerably. Factors that affect the claim include:
- Premiums for the insurance
Interest on the loan
- How long the consumer held it for
Some PPI claims have been worth more than £40,000. However, the typical payout is approximately £3,000. The FOS reports that for every 10 people who file a claim the banks will need to pay between £25,000 and £50,000 in restitution. This has been extremely expensive for many of the country’s largest banks.
Banks Trying to Avoid Charges
The PPI payouts have been a large financial burden for the banks. Many banks are trying to reduce their losses by denying many of the claims that have been filed. Lloyds recently came under fire for refusing to pay claims that may have been caused by fraudulent sales tactics. They also allegedly denied claims filed by PPI claims companies, such as PPI Claims And Advice.
Customers with legitimate claims have filed claims with the Financial Ombudsman Service instead. This has created a large backlog of claims because the FOS has been largely understaffed. The Financial Conduct Authority feels that the way the banks have handled these claims has been unacceptable.
New Policies from the FCA
The new agency is creating stricter policies that they will need to follow. Last month they told the banks that they needed to begin processing claims much more quickly. They said that the banks will need to process all backlogged claims by the end of August.
A spokesperson from the FCA hopes this will alleviate the burden on the FOS and help customers get the money they are entitled to. However, the banks may have difficulty reaching that deadline. They currently have a backlog of approximately 200,000 claims that they need to process.
Implications for the Banks
The banks are currently suffering some of their largest losses since the financial crisis. Most of them say that the problem has been caused by the PPI mis-selling scandal. The public doesn’t have much sympathy for them, but hope that they will be able to meet their obligations when the new claims are processed.