Last-minute PPI claims take banks’ final bill ‘to £53bn’

TWO of Britain’s biggest banks yesterday revealed that a late surge in claims from victims of the PPI scandal will cost them up to £3.4billion, as experts put the beleaguered industry’s total bill at a staggering £53billion.

Lloyds and Barclays said that there had been a significant ‘ spike’ in customers seeking compensation for mis-sold payment protection insurance ahead of the August 29 deadline for claims.

It has forced Lloyds to set aside another £1.2billion to £1.8billion to cover payouts, while Barclays said it would take a hit of between £1.2billion and £1.6billion.

Overall, Lloyds has now been forced to set aside £21.9billion to cover compensation payments to customers and Barclays’ bill has reached £11.2billion.

Meanwhile, think-tank New City Agenda says the industry’s entire PPI bill could now rise to £53billion.

Russ Mould, investment director at AJ Bell, said that, although the deadline for claims had passed, ‘the nightmare is still very much alive’ for the banks.

At the end of July, Lloyds said it assumed it would continue to get 190,000 requests for information each week from customers wondering if they had ever had PPI.

However, this rocketed to between 600,000 and 800,000 requests each week in the run-up to the August 29 deadline.

PPI was designed to cover loan repayments if borrowers fell ill or lost their job. About 64million policies were sold – mostly between 1990 and 2010 although some of them dated back to the 1970s.

However, many PPI products were sold to borrowers who did not want or need them. Lenders have so far stumped up £36billion, with the average cheque size standing at £2,000. Ian Gordon, of Investec Bank, called the PPI affair ‘the worst single-issue value destruction of all time’ for British banks.