Banks and financial services companies have racked up more than £40bn in costs to handle the payment protection insurance scandal.
The costliest mis-selling bill in UK financial services history became even more expensive on Thursday after Barclays set aside a further £600m to handle the cost of claims.
Data compiled by the thinkthank New City Agenda shows that this top up for Barclays has pushed the total provisions incurred by the industry to £40.2bn. Lloyds Banking Group makes up £17bn of that total.
The size of the payouts have already been cited as a reason for booming car sales and holidays. As one penny off income tax costs about £4bn, it could be regarded as a boost to household income.
Not all the money has gone straight into consumers’ pockets. The latest data from the Financial Conduct Authority shows that from January 2011 – when claims started to be made – until the end of July about £25bn had been distributed by the banks and other firms which sold PPI.
Claims management companies have, according to the National Audit Office, received up to £5bn of the payouts.
The banks have also incurred billions of pounds of costs in handling the claims. They have not used all the money they have set aside in anticipation of more applications for compensation.
More than 50m PPI policies were sold, according to the former City regulator the Financial Services Authority. Banks sold most of them – around 45m policies, worth £40bn.
A consultation run by the FCA into setting a deadline for claims closed earlier this month and could result in a cut-off point of June 2019 for remaining customers to make their case. It will also herald an advertising campaign, expected to cost £40m, to encourage customers to come forward and beat the deadline.
