The UK’s leading banks, including HSBC, Lloyds, RBS, Barclays and Santander, could face a total compensation bill in excess of £5 billion over the next five years as they face an avalanche of PPI mis-selling claims, according to research carried out by Morgan Stanley.

Lloyds Banking Group is considered to be the bank facing the biggest PPI compensation bill with Morgan Stanley estimating it could top £1.5 billion. This estimate follows on from a report published earlier this week by Credit Suisse that concluded Lloyds faced a total PPI compensation bill in excess of £1 billion.

The huge increase in expected compensation payments exceeds earlier estimates by the City watchdog, the Financial Services Authority (FSA), which stated earlier this year that it expected the total PPI mis-selling compensation bill to top £3 billion.

Morgan Stanley found that the average successful PPI mis-selling claim value was £2,000, though others in the industry put this figure at £2,500.

So far only a relatively small proportion of affected consumers have submitted a claim for compensation in respect of mis-sold PPI, but it is the increased exposure about the mis-selling scandal that is expected to see the number of claims rise over the coming five years.

It is understood that around 12 million PPI policies may be affected by the mis-selling scandal and that, in total, 20 per cent of consumers will eventually lodge claims for compensation.

In early October 2010 Bank of America revealed that it had set aside a compensation fund of £374 million to meet future mis-selling claims received from its customers about mis-sold PPI policies.

Banks putting up a fight

However, it seems the banking industry will not simply roll over and pay up compensation without a fight. Earlier this month the British Bankers’ Association (BBA) applied for a judicial review of how the FSA and FOS expect banks and lenders to handle claims about mis-sold PPI. The BBA said the FSA and FOS are not assessing claims based on rules and regulations in force at the time when the PPI policies were sold and are instead applying the benefit of hindsight when determining if a PPI policy was mis-sold.

If the BBA is successful in its judicial review it will probably lead to a reduction in the number of successful claims and deter future claims for compensation being lodged.

It is expected that a decision about the judicial review will not be made until early 2011, which could lead to a delay in same claims for being dealt with during the intervening period.

However, it will be difficult to see how the courts will uphold the BBA’s appeal given that the FSA has already fined over 20 businesses, including Capital One, Egg and Alliance & Leicester, in excess of £22 million for mis-selling PPI policies.

Worried you were mis-sold PPI?

At The Financial Complaints Bureau we will review your claim and identify whether your PPI policy was mis-sold. If we think you have a valid claim, we can fight your case and demand that compensation is awarded to cover any losses which you have incurred as a result.

Our success fee is a very competitive 20% (inclusive of VAT)

The process is quick and easy – all you need to do is fill in some forms. The average compensation payment for each claim is £2,500 and most claims usually take around 8 weeks to complete.

We keep it simple…

Claiming compensation is as easy as 1, 2, 3!

1Using the box below, request a PPI Claim Pack to be posted to you. We’ll send a Claim Pack to you within 24 hours and enclose a free post envelope for your response. You need to let us know how many claims you want to make so that we send you enough forms. You need to make a separate claim for each PPI policy sold to you.

2Complete, sign, date and return the forms; this gives us permission to act on your behalf and the information required to start your claim(s).

3Then leave it to us to fight your case. We fight your corner and aim to recover the maximum amount of compensation.

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