It has been reported in UK based broadsheet newspapers, such as the FT and Telegraph, that Barclays is facing a lawsuit in excess of £1bn for the mis-selling of a payment protection product [PPI] at a subprime credit card business called ‘Monument’. The alleged claim is being made by CCUK Finance, the British subsidiary of a US company that 10 years ago acquired Monument from Barclays. So, the global reach of the UK originated PPI mis -selling now reaches the US! And the UK position remains as ‘eyewatering’ as it ever was.
Only a quarter of premiums have been refunded in the UK
The alleged litigation adds to the woe of bank provisioning. However, those who follow PPI developments will already know that the PPI product, even on the usual superficial analysis, has cost UK banks dearly. For a start, current Financial Conduct Authority [FCA] data to the end of February 2017 shows that £26.7bn of redress has been paid back to consumers from the major UK banks. Although PFCA data and Freedom of Information requests [FOIs] show that around half of this figure relates to repaid interest (statutory and account interest) it means that around £13bn of PPI premiums have been refunded. FOIs show that even the financial regulator does not know how much PPI was sold, but analysts believe that the figure is £60bn suggesting that less than a quarter of those who might have been mis-sold PPI have bothered to consider whether they have or not. Worryingly, the 75% who appear to have not considered their position could lose out if the FCA time bar proposal proceeds without ‘checks and balances’.
Is the £1bn claim representative of the Barclays PPI position?
Clearly, different banks have different PPI legacy issues as evidenced by the loss provisions allocated by various banks over the last few years. FCA complaint data shows that Barclays has 160,650 open complaints relating to insurance & pure protection products. Putting this into context, Barclays insurance & pure protection product complaints represent 140 complaints in every 1,000 live products (14%). The Financial Ombudsman Service [FOS] data shows that FOS received 7,044 complaints in respect of Barclays PPI in the period 1 July 2016 to 31 December 2016 and that in the last 6 months FOS upheld 61% of Barclays PPI complaints in favour of the complaining consumer (this compares to 51% across all PPI complaints across all businesses).
There are those who had hoped we were nearing the end of PPI headlines such as these with the proposed PPI deadline (which will shut out legitimate claims and cause consumer detriment if not challenged), but these headlines show it will only be an inappropriate guillotine which will close this issue – whether fair to consumers or not!