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Banks required to pay PPI compensation
The High Court has paved the way for large numbers of compensation claims from individuals who were mis-sold payment protection insurance (PPI), in a move which could cost Britain’s banks as much as £4.5 billion.
Its ruling follows the banks’ challenge of regulations introduced by the FSA last December, which changed the way they sold PPI. As the new rules apply to policies sold before the regime change, as well as afterwards, the Court’s decision to dismiss the banks’ objections is set to prove costly.
There have already been around 1.5 million complaints to banks regarding the mis-selling of PPI, and thousands more are now expected. Indeed, £1.3 billion of the estimated £4.5 billion cost has been earmarked for further compensation claims over the next five years.
However, some banks will continue to put claims on hold until they consider whether they have grounds to appeal the decision. Even if the banks decide not to mount a challenge, the compensation costs could drive a final nail in the coffin of free banking.
