The PPI mis-selling scandal is one of the biggest in UK history, costing the big banks more than £26bn (and counting).
Lloyds Banking Group was the worst offender, having now set aside a mind-boggling £12bn in compensation provision.
Santander (LSE: BNC), Barclays (LSE: BARC), HSBC (LSE: HSBA) and Royal Bank of Scotland (LSE: RBS) have also shelled out billions.
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And still the claims come, with Lloyds paying £2.2bn over the last year alone. Banco Santander (£846m), Barclays (£1.1bn), HSBC (£624m) and RBS (£650m) also had to up their total provisions.
Peak PPI
In January, the Financial Conduct Authority hinted that it may impose a deadline for new PPI complaints to be filed.
The banks will hope it acts, given that PPI still generates 550 new complaints every day, but there are signs the surge is finally starting to peak.
The Financial Ombudsman Service received 204,943 new complaints about PPI in the year to March, down from 399,939 the year before.
Claims Drain
As investors know to their cost, one banking scandal is usually followed by another. And the next shocker may shortly be upon us, with new Ombudsman figures also revealing that complaints about “packaged” bank accounts have shot up by a startling 278% over the last year.
They remain relatively small beer at 21,348 in total, against 5,667 one year earlier. But the potential is massive, given that an estimated 11 Britons pay up to £300 a year for current accounts with added benefits such as travel insurance, mobile phone cover or motor breakdown.
As many as one in five have potentially been mis-sold, according to a survey by YouGov.
Claims Direct
The regulator has previously criticised packaged accounts, and introduced new rules in 2013 forcing banks to check the eligibility of customers before selling the products.
Customers may be free to claim compensation if they were told this was their only bank option, the perks were poorly explained, or they were too old to qualify for bundled benefits such as travel insurance.
Compensation may also be due if sales staff were overly pushy or they ended up with double cover.
Claims management companies know an opportunity when they see one, and are trying to drum up business from disgruntled customers. This could cost the banks billions.
Tread Carefully
Despite the dangers, banks keep on selling packaged bank accounts (just as they carried on flogging PPI in the teeth of repeated warnings).
There are 88 deals on offer today compared with 56 year ago, according to Moneyfacts.
It says that with countless add-ons, packaged bank accounts “can be a real minefield for consumers hoping to pick a suitable deal”.
It is a minefield for banks as well. One that could ultimately blow up in investors’ faces.
