October turned into a PPI nightmare according to one financial analyst as bank after bank announced they were adding massive amounts of money to their PPI compensation pots as the magnitude of the last minute pre-deadline surge of claims became clear.
First off the mark was Tesco Bank, not one of the high street big boys but still needing to add £45 million to its pot.
However, it wasn’t long before Royal Bank Of Scotland (RBS) announced they needed to add just under £1 billion (£900 million) which contributed to an £8 million operating loss before tax for the third quarter of the year.
HSBC was next up with a charge of £302 million. It had already set aside E505.7 million just before the deadline expecting it to be enough to see them through.
In the same week online retailer Shop Direct announced a surprise £241 million update to its PPI provision, helping its full year losses to £185.5 million and leaving it looking for a cash injection to stay in business.
Next Spanish owned Santander announced a £99 million increase in its PPI pot having added £70 million just before the deadline.
Chief executive officer Nathan Bostock said ‘unprecedented levels’ of claims had created a significant spike and more money was needed to deal with it.
Barclays topped the charts with a new provision of £1.4 billion towards the end of the month.
Group Finance Director Tushar Morzaria said the size of increase was driven by the massive spike in claims the bank had experienced, receiving 2 million complaints and PPI requests to the end of September.
The following day Lloyds Banking Group (LBG) took the title with a huge £1.8 billion uplift to take its overall provision to just over £22 billion.
The new provision all but wiped out the group’s profits, bringing them 97% down on the same period last year.
RBS cancels PPI policies
RBS, NatWest and Ulster Bank announced they intend to cancel thousands of PPI policies by the end of the year.
All three banks in the group offer PPI on credit cards and NatWest also offers it on home loans.
The lenders say this is a commercial decision and it does not appear to be linked to the long running PPI mis-selling scandal which has seen the group set aside over £5 billion to pay compensation for successful claims.
The Financial Conduct Authority (FCA) issued a statement to advise people who had made a PPI claim in the run-up to the deadline that it could take until Summer 2020 for them to get a final decision on their claim.
The regulator said: “While firms have large operations in place to deal with PPI complaints, a number of them have informed us that you might not receive a final response to your complaint until summer 2020.”
But they reassured consumers that they won’t lose out because of the delay, saying: “If following your complaint you are entitled to compensation you will receive interest on the amount you are due (typically 8%), which will include the length of time it took to respond.”
In official figures the FCA said the banks were hit by more than 10,000 new claims a day in the first six months of the year, but there are no figures for the final two months leading up to the August 29th deadline.
Some idea of the volume of claims was given by Lloyds who said they were receiving around 900,000 PIRs (PPI Information Requests) a week in the closing stages. Barclays said they had received 2 million claims by the end of September.
Ordered to pay £2 million for PPI breaches
Nationwide, Britain’s biggest building society, was ordered to pay £2 million in refunds to more than 7,000 of its clients for breaches in the PPI rules.
It was ordered to make the payments by the Competition and Markets Authority (CMA) after it failed for six years to remind some of its members who had PPI policies that they had them.
A CMA investigation found that Nationwide had not sent any reminders about their policies to certain groups of members from 2012 to 2017, depriving them of the information they needed to help them decide if they wanted to continue paying for PPI.