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Banks admit defeat over PPI compensation fight

The banking industry has announced it will not appeal last month's high court ruling over how payment protection insurance claims should be handled. The move could cost the banks up to £10 billion.

 
Banks admit defeat over PPI compensation fight

The banking industry has abandoned its legal battle over payment protection insurance (PPI) mis-selling, a move which is likely to cost the banks billions of pounds in compensation payouts.

Following a long drawn out fight between the British Bankers’ Association and the Financial Services Authority over how PPI compensation claims should be handled, the High Court last month ruled against the banks, ordering them to deal with past PPI sales.

The BBA was then given until 10 May to lodge an appeal against the court’s decision.

Today the BBA announced it will not appeal the judgment, a turning point in what has been one of the biggest mis-selling scandals in history.

The news comes just days after banking giant Lloyds announced it had withdrawn its support for any appeal against the court’s decision.

A spokesperson for the BBA said: ‘In the interest of providing certainty for their customers, the banks and the BBA have decided that they do not intend to appeal’.

However, the BBA added: ‘We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities’.

Bob Diamond, chief executive of Barclays, meanwhile said: ‘We don’t always get things right for our customers; when we get them wrong, we apologise and put them right’.

Joining Santander and Lloyds, Barclays said it will now begin to process all on-hold and any new complaints from customers about PPI policies.

It is estimated that the PPI mis-selling disaster could cost the banking industry up to £10 billion in compensation and administration costs. Lloyds has already announced is has put aside £3.2 billion for potential claims, and Barclays £1 billion.

PPI is supposed to cover loan repayments in the event the customer falls ill or loses their job, but providers have been widely criticised for how they have gone about selling the product.

2 comments so far. Why not have your say?

J G

May 09, 2011 at 14:41

Come on - this this was an illegal cartel. Once again, this shows that there needs to be some serious regulation strongly operating in favour of consumers to level the playing field in financial service provision. I was forced to buy PPI even though at the time I pointed out at the time that I couldn't possibly be covered (self employed).

A straightforward abuse of power, the banks knew what they were doing, fleecing huge numbers of people including pensioners ( by definition, not in employment). We have been exposed to a disgraceful foot dragging exercise as banks have used every trick in the book to avoid responsibility.

.

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Meltonian

May 09, 2011 at 14:42

Having helped to introduce the concept to financial services thirty years ago I am sad to see how such a valuable customer service has been manipulated to become purely a revenue-raising product without respect for the customer. This is yet another example of the desk-jockey accountants taking power over the business managers and destroying what little confidence the customers had left in the financial services sector.

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