PPI Claims Continue to Concern Banks
News emerged this week of the increased provisions put aside by banks to cover the PPI claims which are not dwindling as fast as they’d like. In particular, the banking industry is less than pleased at the acceleration in the number of claims which relate to PPI policies sold before 2005. The response to this trend has cost the banks an estimated £1.5 billion in topping up PPI compensation funds.
Taken at face value, one could be mistaken for overestimating the decline in PPI claims. The Financial Ombudsman Service said last week that it had received 57,000 PPI-related complaints in the second quarter of the year, in comparison with 132,000 in the period last year. However, while the overall trend is one of decline, the issue which is unsettling the chiefs in City banks is the steep increase in PPI claims from the pre-2005 era, and this has led to reasonable suspicions that lenders will kick up a fuss and make revived calls for the imposition of a cut-off point for those claiming PPI.
This is by no means a new move. Indeed, the banks took the issue to a judicial review in 2011, unsuccessfully arguing for 2005 to become the cut-off point. The fact that PPI claims from before 2005 are increasing, along with the substantial top-ups necessary to compensate PPI claimants, has rattled the major banks.
It is likely to be their argument that, as they are only obliged to keep customer records for seven years, they will not have the necessary essential information relating to PPI claims from so far back. Executives at big lenders will also cite the costs of administering ‘invalid’ claims which can reach £1,000 each which they consider to be an erosion of capital.
Despite the fact that the Financial Conduct Authority’s chief executive, Martin Wheatley, told MPs he remained sceptical about the prospect of a cut-off point, the British Bankers’ Association (BBA) has held initial talks with the City regulator regarding a cut-off for PPI claims.
The latest tentative steps taken towards a cut-off point have been faced with hostility from consumer groups, who were also keen to kill the prospect of any deal in the wake of previous attempts by the banks.