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PPI compensation could reach £9 bilion
Customers that have bought Payment Protection Insurance (PPI) from their bank and believe they have been miss sold the policy, could now be inline for compensation. The British Bankers Association have abandoned their battle to after having lost its High Court challenge which outlined their opposition to new rules set out by the Financial Services Authority.
The pay out due to customers who bought PPI is said to top around £8 billion with Lloyds Banking group setting aside £3.2 billion resulting in the banking group announcing a pre tax loss of £3.47 billion in the first three months of 2011. For the same period last year the bank made a profit of £721 million.
With a market share of around 15 per cent for PPI, Barclays have set aside £1 billion to pay for its share of compensation claims. Lloyds has about 40 per cent market share of PPI. The Royal Bank of Scotland will be providing an update on how much compensation it will pay out at a later date.
Taking the vast amounts of money the banks have set aside in to consideration, the final bill may well be double that of the FSA’s original estimation. The Financial Ombudsman declared that PPI cases had produced more than 100,000 complains during 2010, more complaints than any other banking product.
The average compensation paid out was £900 on regular premiums and around £2,000 for single premium insurance where the whole of the policy had been paid upfront and added to the overall cost of the loan.
Policies were sold to customers who were never going to be paid due to their circumstances such as those who had already retired, seasonal workers and people with pre existing illnesses. PPI policies sold by the banks were often far more expensive than similar protection products from independent insurers.
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