UK banks are facing a second wave of PPI payouts
Banks across the UK are facing a second wave of Payment Protection Insurance (PPI) withdrawals after a series of court rulings found the products were unfair.
The ruling means anyone in the UK who has been denied payment by a bank, who has only been partially reimbursed, or who has never made a claim can reclaim all their money from a bank, regardless of whether the products are suitable for them were or not.
As of now, UK banks have already paid out £ 38 billion in compensation for mis-sold PPIs, making the scandal the largest consumer protection scheme in UK history.
PPI policies were typically sold along with loans, credit cards, and mortgages to cover repayments when people couldn't. However, PPI guidelines have often been marketed to people who may not have done so able to claim were unaware they were buying it or already had coverage.
Banks that sell PPI would receive huge commissions from insurers, which in some cases make up more than 95% of the cost of insurance. Such commissions were never communicated to customers. The courts found that many customers would have questioned the value of PPIs and may not have bought the policies had customers been aware of the enormous commissions.
The new reimbursement requests are based on a different set of rules related to this commission issue that opens the floodgates for claims dating back to the 1990s, when many of the policies were sold.
The court ruling states that even if customers were satisfied with a PPI product, they may still be able to claim compensation because they were unaware of the injustice of the product due to the high commission fees.
A second wave of payouts is a heavy blow to the banks, who were desperately hoping the PPI saga was over after a deadline for submitting all applications was set before August last year.
The verdict also comes because UK banks have allocated millions of pounds on bad coronavirus loans. Last week Metro Bank posted a pre-tax loss of £ 240.6m for the first six months of this year as COVID-19 reported a loss of around £ 109m.
In the last week of July Virgin moneyThe owner of Glasgow-based Clydesdale Bank provided an additional £ 42m to cover potential losses due to a surge in bad COVID-19 loans. Lloyds Banking Group In addition, the first half of this year recorded a pre-tax loss of £ 602 million as the bank set aside £ 2.4 billion for bad loans.
Santander Group suffered the largest loss in history with a loss of 10.8 billion euros (£ 9.8 billion) in the first half of this year. Santander UK's profits fell three-quarters as the bank suffered a € 12.6 billion (£ 11.4 billion) write-down on COVID-19 costs.
The Financial Conduct Authority According to data, up to 64 million PPI policies have been sold in the UK, mostly between 1990 and 2010. About 32.4 million claims have been made, suggesting that only half of the PPI misselling has been resolved.