British banks face a possible £4.5bn payout for miss-selling payment protection insurance
British banks may have to pay out up to £4.5bn after losing a High Court case.
The landmark ruling ordered banks to re-examine old cases and pay compensation to consumers who had been mis-sold payment protection insurance (PPI). The result could see them pay out £1.5bn in new complaints and £3.2bn in additional bills over the next five years.
PPI, an insurance which protects customers against payments in the event of redundancy or illness, was sold to many customers without their consent or knowledge. The number of complaints and court cases against banks has increased significantly since 2007 and spiked in 2010, with over 50 per cent of all complaints made to the Financial Ombudsman against banks relating to PPIs.
The Ombudsman has received around 5,000 PPI related complaints a week since the BBA announced its decision to fight regulatory reform in late 2010. The majority of cases so far have been settled in favour of customers. Around 1.5mn customers have already lodged complaints and millions more are expected to challenge PPI purchases in the wake of the ruling.
The British Bankers’ Association (BBA) has lobbied against regulatory reform, claiming that regulation would impose new standard on old cases. They now have 21 days to appeal the decision.
