UK banks scrap PPI mis-selling fight
The UK's banking industry today abandoned its legal fight over the mis-selling of payment protection insurance, paving the way for thousands of customers who were mis-sold the policies to receive compensation.
The British Bankers' Association (BBA) said it will not appeal after it lost its High Court challenge against new FSA rules on mis-selling PPI being applied retrospectively.
The move comes after Britain's biggest retail bank, Lloyds Banking Group, last week said it was pulling out of any further legal action and setting aside £3.2bn (€3.6bn) to compensate customers.
Barclays also announced today that it will pull out of the legal fight and said it will begin to process complaints from customers which were previously on hold.
Barclays has set aside £1 billion as a provision against claims, while taxpayer-backed Royal Bank of Scotland also confirmed today that it will not be contesting the ruling on PPI.
The bank has yet to provide an update about how much the compensation claims are likely to cost it.
RBS added that today's decision was an important step for the banking industry as it sought to restore the confidence and trust of consumers.
The furore surrounding PPI comes after banks received widespread complaints that they sold PPI to customers who were not eligible to benefit from the products.
The huge amount set aside by Barclays and Lloyds suggests that the final PPI compensation bill for the whole industry will be far higher than the £4.5bn (€5.1bn) originally estimated by the Financial Services Authority (FSA).
There has been speculation that between £7bn and £8bn could eventually be paid out by banks.
Barclays chief executive Bob Diamond said: "We don't always get things right for our customers. When we get them wrong, we apologise and put them right."