PPI payments hit £1.9bn in 2011, says FSA
- 22 February 2012
- From the section Business
Banks paid out £1.9bn in compensation in 2011 for the mis-selling of payment protection insurance, the Financial Services Authority (FSA) has said.
Payouts accelerated towards the end of the year, with a monthly record total of £441m paid in December.
PPI was supposed to repay people's loans if their income dropped because they fell ill or lost their jobs, but thousands were mis-sold the policies.
The figures are supplied to the FSA by 19 unnamed firms.
These firms account for the vast majority of PPI cases.
Typically, successful claimants receive more than £2,750 in compensation, although some have received much bigger sums.
Most are paid compensation because they would never have been able to claim on the policy, or they were unaware that they did not have to buy the policy when they got the loan.
After losing a High Court test case in April, banks were told to deal with 200,000 complaints which they had put on hold pending the hearing's outcome.
Further complaints that have come in since, which means the final bill for banks could reach £8bn.
Consumer groups have called on these institutions to get through the list of compensation payments quicker.
"There is too much putting off responses, too many delays for many, many people trying to get their money back for something they should never have been sold in the first place," said Richard Lloyd of the consumers' association Which?.
However, payments have picked up from £268m in October, and £379m in November.
Consumer groups have also been expressing caution to those considering making a bid for PPI compensation through claims management companies.
The Financial Ombudsman Service, which independently assesses disputes between financial institutions and consumers, estimated that eight out of 10 PPI complaints were currently being brought by claims management companies.
These firms have been sending text messages and taking out advertisements on the television, encouraging people to make a claim, although they take a cut of up to 25% of the payout.
People can make a claim on their own - through bodies such as the statutory compensation scheme, the Financial Services Compensation Scheme (FSCS).
"Claims management companies take a significant part of the possible payout and are no more likely to make a successful claim than consumers can on their own," said Mark Neale, chief executive of the FSCS.
"People can save thousands by submitting their claims directly to the FSCS, rather than through a third party. While it may seem reassuring to have someone else do the paperwork, consumers should not be daunted by the process of making a claim."
The FOS currently receives around 1,000 new PPI complaints every day. In total, it has received about 300,000 complaints, primarily sold by banks and attached to credit cards and loans
It upholds around three out of four cases in the consumer's favour, telling the business to pay compensation.
Barclays, which has set aside £1bn to cover mis-selling claims, issued figures on Wednesday showing PPI fuelled a 67% jump in the number of complaints in its general insurance and protection business to 122,922 in the second half of 2011 compared with the first half of the year.
However, it said complaints in the banking category had dropped sharply.