The Financial Services Authority believes the PPI compensation bill could be £4.5bn The banking industry has abandoned a legal fight over the mis-selling of payment protection insurance (PPI).
The British Bankers’ Association, which fought the case, said it would not appeal after losing a court challenge against new rules on mis-selling.
Barclays Bank said it had set aside £1bn to pay compensation, HSBC £269m, while RBS said it too would not contest the court ruling.
Last week, Lloyds Banking Group made a £3.2bn provision for possible claims.
The decisions mean that several milion people may now be eligible for a compensation payment.
PPI policies are supposed to cover loan repayments if someone falls ill, has an accident or loses their job.
But many of the policies were mis-sold.
In some cases they were sold to self-employed people who would not have been able to claim, to borrowers who were wrongly told that taking PPI was a condition for being granted their loan, and even to consumers who did not realise they were taking out a policy.
Last month the High Court ruled that the banks had to obey the new rules of the Financial Services Authority (FSA), which require them to go back over all their past sales to see if the customers have a claim for mis-selling.
In a statement the BBA said: “In the interest of providing certainty for their customers, the banks and the British Bankers’ Association have decided that they do not intend to appeal.”
“We don’t always get things right: when we get them wrong, we apologise and put them right”
Bob Diamond Chief executive, Barclays BankQ&A: What now for PPI? One family’s PPI mis-selling tale
Royal Bank of Scotland confirmed on Monday that it would also be addressing customers’ complaints, but said it had yet to decide how much to set aside for possible claims.
RBS said in a statement: “We are already in discussions with the FSA to clarify its requirements and the implications for our customers and shareholders.
“This is an important step for all UK banks in our efforts to restore the confidence and trust of consumers,” it said.
Barclays chief executive Bob Diamond said the bank would now begin the process of compensating customers.
“We don’t always get things right: when we get them wrong, we apologise and put them right.
“We have taken this decision because it is in the best interests of our customers, as well as for Barclays and its shareholders. Creating certainty, particularly regarding past issues, is of benefit to all parties,” Mr Diamond said.
The Financial Ombudsman Service welcomed the banks’ decision to deal with the mis-selling.
“It’s very good news that the banks will not be appealing the High Court’s clear-cut judgment, which endorsed the ombudsman and FSA’s approach to PPI complaints,” said chief ombudsman Natalie Ceeney.
“Consumers should come to us at the ombudsman if they’re unsure about what to do next. Meanwhile we will be working with the banks, over the coming weeks, to ensure that consumers’ complaints are dealt with fairly and promptly.”
The Financial Services Authority has estimated that banks will have to pay up to £4.5bn to settle the thousands of claims.
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