PPI compensation could reach £8 billion
The final bill for compensation paid to customers who were mis sold Payment Protection Insurance policies could be far higher than originally estimated by the Financial Services Authority.
The total cost could reach more than £8 billion. The Financial Ombudsman received more than 100,000 complaints during 2010, more than any other financial product. The British Bankers Association have dropped their battle with the FSA and agreed to pay out to customers who bought the insurance from the high street banks when they had no chance of ever being accepted for a payout if they were unable to pay back the loan they insured.
The already retired, seasonal workers and those with pre existing conditions were all sold the policy that insured against non payment of the premiums if they lost the means to pay the loan. These customers were not eligible for a payout and have therefore bought a useless product.
The average payout for customers is thought to be around £900 with the compensation being much higher for those who paid for the premiums on an up front basis and added to the total cost of the loan. PPI policies sold by the banks were often far more expensive than similar protection products from independent insurers.
Lloyds Banking Group has set aside £3.2 billion for successful claims, Barclays have set aside £1 billion and The Royal Bank of Scotland has yet to announce the amount they will be setting aside.
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