Barclays Bank, the third largest in the country, has decided to put aside more cash to compensate for the miss-selling of insurance on loans. Rival banks are following in their wake as the industry as a whole faces a massive bill of £7billion or more. The bank has reported an increase in PPI claims over the last two months, so has increased the provision by £300million to £1.3billion.
Complaints are being closely watched by financial analysts, so that they may assess the possible final total. Loan insurance is reported to have been miss-sold to millions of clients. The increase in claims is partly due to the huge marketing campaigns led by claims management companies. These companies take a large fee from their clients for handling the paperwork
Policies of this nature were usually taken out with personal loans or mortgages. The idea behind them being that if clients were made unemployed or had prolonged periods of sickness the loan fee would be covered. However, people who were out of work, or worked for themselves, have been sold the policy which would be void,
Since the beginning of 2011, £2.5billion has been paid out. The financial regulator recently produced data showing that lenders paid out almost £405 million in January, in December payouts were particularly high.
The provision set aside by The Royal Bank of Scotland stands at almost £1000 million. Reuters recently learned from a source that the level of provision is set to rise next week, when a first quarter update is given. Finance Director of RBS, Bruce Van Saun, claimed in February that he was confident the cover was adequate, claiming that it had been rigorously reviewed at the end of last year.
Lloyds Banking Group has a provision of £3.2 billion, the largest in the country. In February, HSBC raised provision from £270 million to £400 million. On Thursday Santander’s provision remained the same at £550million, however this is being closely monitored, a spokesman claimed.