PPI payments mounting as banks pay £100m in two months

Consumers received more than £100 million in compensation for payment protection insurance (PPI) mis-selling in May and June after the banks ended their legal challenge against the City watchdog.

The 16 firms responsible for more than nine in ten PPI complaints paid out £215m in compensation to mis-selling victims in the first half of this year, including £65m in June alone, the Financial Services Authority (FSA) has revealed. The figures were published ahead of today’s deadline for Lloyds Banking Group, Royal Bank of Scotland and Barclays to resolve PPI complaints.

The banking industry’s challenge against FSA rules forcing them to reopen PPI sales dating back to 2005 ended in May when they chose not to take the case any further. The decision paved the way for compensation claims worth an estimated £4.5 billion. The banks had previously put complaints on hold, under a waiver agreed with the FSA, which told them to deal with the cases by 31 August.

Richard Lloyd, executive director of Which?, said: “Over £200m in six months sounds like a lot, but when you compare it to the £7.4bn that the banks have set aside to cover PPI mis-selling, you can see that this is just the start.

“There’s no excuse for banks not to have cleared the backlog of complaints caused by the Judicial Review. Any firms that have not met the 31 August deadline should face tough enforcement action.”

The £215m paid out in compensation in the first six months of this year included cases settled by the Financial Ombudsman Service, which has received more than 63,000 new PPI complaints since April. Three in four complaints are upheld, with an average payout of £2,750.

Margaret Cole of the FSA said the treatment of PPI complainants has left an “indelible stain on the financial industry’s record”.

She added: “While the amount of redress paid in May and June is unsurprisingly large in the wake of the judicial review, looking ahead we expect the amounts to vary somewhat as firms clear their backlogs while dealing with complaints as well.”