McHale & Co. Solicitors Blog

Banks continue to be fined for PPI scandal.

A number of years ago, banks and credit card firms worked out that they could make lots of money selling insurance to borrowers, typically people taking out loans or credit cards. The supposed aim of the insurance was to repay any outstanding loans if the borrowers fell ill or lost their jobs. This meant the sale of the now infamous Payment Protection Insurance, or PPI.

It has become abundantly clear that the real aim of the lenders and brokers, as always, was profit. The lenders believed that they could charge a lot for the cover and that people would not really notice the cost either. Some did very good jobs of hiding the costs too.

It has been reported that, at one stage in the middle of the last decade, sales of PPI polices were the single biggest source of profit for the UK's High Street banks.

The Co-op has recently been fined £113,000 by the Financial Services Authority (FSA) for its delays created in handling its customer’s complaints about PPI. This was because The Co-op decide to put complaints on hold during a judicial review process, even though this was contrary to the expressed instruction from the FSA at the time.

Tracey McDermott, the FSA's director of enforcement and financial crime, said: "The FSA made it clear that firms must continue to process complaints where possible during the judicial review and we warned that enforcement action could be taken if this was not done”.

The reality in our experience of dealing with many hundreds of claims for people’s claims is that no bank was/is better or worse than any other at dealing these types of claims. Therefore we would not be surprised to see more fines handed out by the FSA in the near future for similar reasons. Meanwhile the compensation bill continues to rise for the lenders.

It is believed that as at November 2012, the amount of money put aside for paying compensation on PPI claims is as follows:

  • Lloyds: £5.275bn
  • RBS: £1.735bn
  • Barclays: £2.176bn
  • HSBC: £1.333bn
  • Santander: £821m
  • MBNA: £506m
  • NRAM (Northern Rock and Bradford & Bingley): £293m
  • Yorkshire and Clydesdale banks: £275m
  • Co-op bank: £120m
  • Nationwide BS: £128m
  • Capital One: £66m
  • Tesco: £92m
  • Welcome Financial: £113m
  • Principality BS: £27m
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