After reading numerous statements from the UK banking industry you could be forgiven for believing that the pre-deadline surge in claims was all the fault of claims management companies (CMC).
However, It wasn’t all down to the CMCs, the FCA’s consumer awareness campaign helped too. But it’s a good job that they made the effort because, even after a decade of being forced to pay out for their PPI mis-selling transgressions, the banks weren’t exactly falling over themselves to pay the tens of thousands of claimants the money they were owed.
And, while we’re about it, let’s not forget that the whole sorry saga is a direct result of the firms who claim to have our best financial interests at heart selling their valued clients a product they didn’t want, didn’t need, didn’t ask for and could never have used if they tried to make a claim.
Serious offences committed
When Andrew Tyrie was chairman of the Treasury Select Committee he was famously quoted as saying of the UK banking industry: “What really sticks in the craw of the electorate is that what you and I would consider to be very serious offences have been committed, and yet there doesn’t seem to be an orange jumpsuit on anyone.”
‘Serious offences’ indeed. The FCA’s latest compensation figures show Britain’s lenders have so far had to repay £36.4 billion to their customers. That’s an astonishing figure.
It’s astonishing what just £1bn will buy
Just £1 billion would pay 42,000 nurses’ salaries or finance five nights self-catering in Ibiza (with flights) for the whole population of Northern Ireland. In comparison, US billionaire President Donald Trump is worth £3 billion or you could build ten brand new hospitals at £90 million each and still have change.
And it’s not over yet. We have no figures yet from the FCA for August, September and October, but the July figure for redress paid to clients was £432.9 million (more than four new hospitals) and it was the largest monthly payout since March 2016.
Banks unprepared for surge in claims
According to a statement from the FCA, the banks were taken by surprise by the surge of last-minute claims and have advised the regulator that it could be Summer 2020 before they are able to give every claimant a final decision.
Their lack of preparedness on such an important issue stretches credulity. The first alarm bells on Britain’s biggest ever financial scandal were first sounded back in 2007, but it was the industry’s failed attempt to derail the claims process in 2011 which really opened the floodgates and customers started to understand they had been ripped off for decades.
Scale of the problem – 64 million policies sold
The FCA estimates around 64 million policies were sold between the 1990s and 2010 and a look at each bank’s annual report will reveal that they have done their homework and calculated how many of those 64 million were sold by them.
Yet they seem to have been unable to translate that information into their compensation liability and found the need to increase the size of their compensation pot at least once a year and often more frequently than that.
Latest Increases to Payout Pots by PPI Culprits
The latest increases came either just before or just after the deadline when the industry added over £5.3 billion to their redress reserves from Lloyds at £1.8 billion and Barclays ay £1.4 billion down to £10 million for Studio Retail.
Experts believe the total bill, once the dust settles some time next year, will be in excess of £50 billion, or enough to build more than 500 new NHS hospitals.
Will that be the time when the authorities start to measure up people for their orange jump suits?