LONDON (Reuters) - Britain’s banks could have cut the bill for compensating customers mis-sold loan insurance if they had tackled the problem earlier, the head of Britain’s Financial Ombudsman Service told Reuters on Thursday.
Banks are facing a bill of 12 billion pounds to compensate customers wrongly sold policies meant to protect borrowers who lost jobs or became ill, and industry sources have told Reuters they expect the number to double.
Britain’s banks lost a landmark court case over payment protection insurance (PPI) in 2011, having fought consumer groups over the issue for years, opening the floodgates to hundreds of thousands of claims over one of the UK’s biggest ever consumer scandals.
The issue had first been raised by Which? Magazine in 1998.
“The bill would have been far lower if they’d tackled this earlier. It felt like a long period of prevarication,” Chief Ombudsman Natalie Ceeney told a group of MPs charged with reviewing standards within British banks.
Ceeney said the public’s loss of trust in banks had led them to seek the help of claims management firms, which take a hefty chunk of the compensation in return for dealing with their clients’ paperwork.
The ombudsman service, which steps in when banks and their customers cannot reach an agreement, said this week it is receiving up to 10,000 complaints each week about PPI and has had to hire 1,000 new staff to cope with it.
Ceeney also said the amount of compensation paid so far “doesn’t come anywhere near the profits made from PPI”.
Reporting by Matt Scuffham; Editing by Mike Nesbit