One of Britain’s most costly banking scandals, the mis-selling of payment protection insurances, has cost the UK’s banks 40 billion pounds (49 billion dollars). The scandal does not show signs of ending any time soon.
According to a report posted on the Financial Ombudsman Service’s website the payment protection insurances (PPI) remain Britain’s most complained financial product with the total cost of the scandal surrounding their mis-selling amounting to 40 billion pounds in admin and compensation claims. Just for the three-month period of July-September 2016 Britain’s financial watchdog has received 42, 907 complaints.
The PPI is a form of insurance intended to help pay out consumers when they fail to make payments on their loans. However many of these consumers were either duped into buying the product or did not know who does it work. The PPI was incorrectly sold alongside loans, credit cards and mortgages and has forced banks to pay out customers, who were wrongly sold the coverage.
Since 2003, the Financial Ombudsman has received a total of 1.5 million PPI complaints with the majority of them flooding the watchdog in 2011, following a lawsuit regarding their payment. Since the beginning of the scandal the PPI has been banned, however banks are still forced to pay out consumers to whom the product has been mis-sold. They have set aside an estimated £40 billion to deal with claims since then, and £25 billion of that has now been paid out, which means banks are now paying out with significantly fewer resources.
Lloyds has set aside £17.1 billion, Barclays has set aside £8.5 billion, RBS £4.7 billion, and HSBC £2.9 billion.