Barclays boosts PPI payout fund by £400m
Barclays has put aside a further £400 million to cover payment protection insurance (PPI) complaints, its latest half-year accounts reveal today.
To date, the bank has spent £5.9 billion on redress for 1.7 million people, including the cost of administration. But the total cost to the bank could rise further still, as money allocated for future claims currently stands at £2 billion.
Of the complaints Barclays has received (excluding those from people who never had the insurance policy), 87% have been upheld in favour of consumers so far, with people receiving an average £1,845 in redress. The bank expects future claims to be of a similar value and to have a similar success rate.
Earlier this week, the Financial Ombudsman Service revealed that PPI remains the most complained about financial product, with over 43,000 complaints received in the last three months.
Barclays’ half-year report also reveals that the bank has allocated £282 million for redress claims regarding foreign exchange transactions made between 2005 and 2012, and £118 million for packaged account claims.
The bank’s profits for the first half of the year fell by 21% to £2 billion compared to the first half of 2015. This is partly due to redress provisions, but it’s also down to write-downs in the value of parts of the business earmarked for sale.
The company’s tax bill will also rise as fines and redress claims are no longer tax deductible.
Earlier this week, Lloyds Banking Group (which includes Lloyds Bank and Halifax) reported its half-year results, which showed the group made no changes to money allocated for PPI claims. However, the group continues to receive 8,500 PPI claims per week, which it says are “broadly in line with expectations”.
PPI claims against Lloyds dwarf those for Barclays, with the group allocating over £16 billion for claims since 2011. Lloyds currently has £1.95 billion put aside for future claims. It expects around 1.1 million more claims, having received over 4.7 million to date.
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.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.