Are you eligible for compensation?
The British Bankers' Association has today confirmed that it does not intend to appeal the recent High Court decision regarding Payment Protection Insurance meaning that several million people could be eligible for compensation.
Financial commentators and affected customers had been eagerly awaiting a response from Britain’s banks in light of the High Court’s decision last month to uphold new rules against mis-selling Payment Protection Insurance (“PPI”). Today they were greeted with the news that the banks had admitted defeat and would not be lodging an appeal as had been initially anticipated. Instead, preparations are being made for the floodgates to open with complaints and compensation claims expected in their thousands.
Lloyds Banking Group was the first to issue a statement that it would not support an appeal of the court’s decision, with Barclays and Royal Bank of Scotland shortly following suit. Faced with such withdrawal of support the British Bankers’ Association (“BBA”) had no choice but to concur and have publicly confirmed that they will accept the decision of the High Court that was handed down last month and do not intend to appeal it.
Banks will now be forced to reconsider thousands of cases and have the enormous administrative task of writing to customers affected by the mis-selling of PPI policies and advising how they should make a claim. Lloyds, Halifax and Bank of Scotland are among the few who are also inviting individuals to appeal using a designated hotline or via the website, rather than waiting to be contacted by a customer advisor.
This dramatic decision will cost the banking industry dearly and the Financial Services Authority estimates that up to £4.5 billion will be paid by the banks to settle consumer claims. With Lloyds announcing an initial reserve of £3.2 billion to cover compensation costs and Barclays and RBS allowing £1.1 billion and £1 billion respectively this estimate seems to be quite conservative.
Having only just begun to recover from the previous banking crisis, this difficult decision could not have come at a worse time for the financial services sector. Investors and analysts will be watching carefully to see the impact that this new blow will have on an already precarious industry.