Lloyds sets aside another £1.8bn for PPI claims
The move sees the total amount the bank, which owns Halifax and Bank of Scotland, has set aside for claims reach nearly £10 billion - nearly three times as much as RBS.
In one of the biggest scandals in banking in recent years, thousands of customers are thought to have been mis-sold the insurance, which was intended to repay people's loans if their income dropped or they lost their jobs due to falling ill.
Such is the extent of compensation, finance expert Andrew Hagger of moneycomms.co.uk said the industry around mis-selling was actually helping the economy get back on its feet.
"It's amazing that the level of PPI pay-outs remains at such high levels although no doubt fuelled by the continuing hard sell from the claims management industry with its incessant advertising programme," he said.
"Whilst it's hit the bank's [Lloyds Banking Group] bottom line the plus side is that it's another £1.8 billion that'll find it's way into the UK economy and will help to keep the high street recovery on course. And despite this bill for compensation, the bank has still managed to turn in a healthy profit."
The bank is set to release its full results on February 13 but said its underlying profits for 2013 would be more than £6 billion.
If you think you may have been mis-sold PPI, remember it's easy and free to make a claim for compensation yourself. For more information, visit our guide at moneywise.co.uk/cards-loans/loans/how-to-reclaim-your-ppi-premiums.
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.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.