Banks pay out £1.9 billion in PPI scandal
Banks paid out £1.9 billion in compensation last year to people who had been mis-sold payment protection insurance, according to figures from the Financial Services Authority.
PPI was intended to repay people’s loans if their income dropped because they fell ill or lost their jobs, but thousands of ineligible people were mis-sold the policies.
After losing a High Court test case in April 2011, banks were told they had to pay out to consumers who had been mis-sold the cover.
Typically, successful claimants receive around £2,000 in compensation.
However, while payouts are now being made they aren’t been made quickly enough, according to consumer group Which?.
"It’s good to see the PPI payout is finally starting to speed up but last year’s compensation of £1.9 billion is less than a quarter of what lenders expected to refund. Too many people are still finding the claims process too lengthy, the banks must streamline the process to make it easier for people to claim," says Which?’s executive director Richard Lloyd.
However, the figures do suggest though that the speed and number of payouts is increasing, as compensation payments rose from £268 million in October to £441 million in December.
The final compensation bill is expected to reach £8 billion.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.