RBS warns of further £900m hit from deluge of late PPI claims

Royal Bank of Scotland has warned it could be hit with a further £900m bill for mis-sold payment protection insurance after apparently being caught out by a last-minute surge in claims.

The rival banking group CYBG – whose brands include the Clydesdale and Yorkshire banks and Virgin Money – has also indicated it faces a big bill after being deluged with claims.

PPI is Britain’s costliest consumer scandal, with £36bn paid out by UK banks to compensate people who bought often worthless insurance cover thinking it would help them repay debts in the event of sickness or unemployment. However, this total does not include payouts made in July or August, or those still to be made, so is likely to rise sharply over the coming months.

RBS, which is 62% owned by the UK government, said the volume of PPI claims it received during August was “significantly higher than expected”, with a further spike in the days leading up to the 29 August deadline.

It had already set aside £5.3bn for PPI claims.

RBS and its NatWest arm were hit by technical glitches on 27 August, with both banks’ main websites out of action for several hours. There were more problems on 29 August, when some online PPI claimants were told that “due to system problems” NatWest was unable to progress their application at present, while others reported jammed phone lines.

In a statement to the stock market, RBS said it was expecting to declare a further charge for PPI claims of between £600m and £900m in its third-quarter results, in addition to what it had set aside, adding: “The processing of claims is ongoing, and the ultimate provision recognised could be above or below this range.”

It said these figures took into account claims by the official receiver, which has been pursuing outstanding compensation payouts in respect of bankrupt and insolvent individuals to ensure creditors receive what they are owed.

While the official deadline for making a claim was 11.59pm on 29 August, the technical problems at RBS and NatWest may be linked to their decision to announce that individuals may be able to complain after the deadline “if there is a significant reason or exceptional circumstance as to why you couldn’t complain before this date”.

Meanwhile, CYBG said that following its last trading update on 30 July, it had seen an increase in complaints during August, with a “spike” during the final days. It said determining the financial impact would take several months, but it was trying to get an initial cost estimate, “which is expected to be material”.