With the PPI deadline edging nearer, the amount of money paid back to consumers by the banks is increasing to astronomical levels.
The most recent updates from the Financial Conduct Authority (FCA) revealed that the total amount of money paid back to consumers for mis-sold payment protection insurance (PPI) is set to hit £30 billion. This figure is the total amount repaid to customers since January 2011. The figure is the highest of any mis-sold product in the UK. The banks have set aside more money year after year to pay customers back.
To bring an end to the claims and draw a line under the scandal, the FCA has set a deadline for all PPI claims. Customers have until August 2019 to make a claim. Otherwise, they forfeit any money they were owed and won’t be able to get it back.
But, with over a year still remaining and a total of 45 million PPI policies sold, there is plenty more opportunities for the bank to shell out even more money. Knowledge about the ‘Plevin Ruling’ is increasing the number of claims made before the deadline further still. In 2014, a PPI case from Mrs Plevin revealed that 71% of her PPI sale was a commission. As this was not disclosed, this too was a form of mis-sold PPI. The Plevin case has opened up even more opportunities for people to make claims, even if they chose to buy PPI but were unaware of the commission price.
How much could the banks pay out before the deadline?
Despite nearly £30 billion already being paid to customers, there is still a considerable amount of time for that amount to increase.
On average, the amount paid to consumers by the bank each year is approximately £4 billion. If this remains true for 2018 and half of 2019, the amount paid out could reach just under £40 billion before the deadline. Many PPI claims companies are expecting a surge in claims in 2019, easily pushing the amount above the £40 billion mark.
In addition to paying consumers, the banks have suffered more losses in fines and shelling out for the PPI deadline campaign. The Telegraph reported that £30 million of the campaign was paid for by the banks involved in the scandal.
Most of the banks have hired extra staff to deal with the number of PPI claims, totalling the costs up even more. Even after the August 2019 deadline, the Financial Ombudsman would still have a backlog of PPI claims to deal with. When a case is referred to the Ombudsman, the waiting list can still be up to two years for a claim to be resolved.
At the end of 2016, it was reported that £40 billion had been set aside for the PPI compensation. Lloyds Banking Group putting aside the largest amount for the scandal. With both big and small banks and building societies involved in the scandal, very few companies have come away unscathed.
Will there be another large mis-selling scandal in the UK?
The PPI scandal has plagued the banks for years. More than that, it has resulted in billions of pounds being paid to customers, staff, fines and the PPI deadline advertising campaign. Yet, despite this, it hasn’t stopped other, albeit smaller scandals stemming from the banks in previous years.
In 2013, the Financial Times reported the mis-selling of credit card theft insurance. While it hasn’t resulted in a £30 billion payback to customers, it’s not helped customers have any more trust in the banks. The BBC highlighted another mis-selling scandal targeted at small businesses. Both of these were after the emergence of the PPI debacle.
However, none of these have caused such a stir and made such an impact, both financially and culturally, as the PPI saga. It is unlikely that the banks will put themselves in a position again where £30 billion has to be returned to customers over just seven years. This scandal has made banks and consumers wary. If mis-selling continues, banks might continue to see their customers choose an ethical bank over the high street banks.
With the PPI deadline looming and newfound knowledge spreading about the Plevin case, there is no doubt that the banks’ contribution to rectifying the situation will hurtle towards the £50 billion mark. It is likely that they have no intention of conducting a mis-selling scandal such as this again, but only time will tell.