Total PPI Compensation Bill to Reach £16billion
Financial analysts are forecasting that the third quarter report of high-street UK banks may indicate additional reserves for PPI claims. The Financial Ombudsman reports that it is receiving at least 1,500 claims on a daily basis and they recently reached their 500,000th claim. Barclays and Lloyds, two of UK’s biggest banks, continue to approach the red zone gradually due to every increasing PPI compensation costs.
Currently, Barclays holds £2 billion in repaying PPI compensation and announced an additional £700 million to address additional PPI. More than the amount they thought they need to compensate, Lloyds, holding at least £4.3 billion, might need to add a further £2.3 billion to their PPI compensation pot. HSBC and RBS each have £1.1 and £1.3 billion in total respectively, taking the total UK PPI bill close to £13 billion.
Analysts state that with the rising number of PPI complaints, the PPI compensation bill may reach £16 billion within the next 12 months. However, The PPI crisis might continue until the year 2016, based on current performance and speed of processing the claims, so the total PPI bill may be well over £25 billion.
The Financial Ombudsman recently increased their manpower and rented spaces with fixed contracts to continue to process the situation.
Banks have blamed claims management companies for the large number of claims being received, with Lloyds Banking Group stating that a large proportion (up to 25%) are bogus or fraudulent claims. However, recent reports indicate that the Financial Ombudsman has ruled against Lloyds in 98% of claims that they had initially rejected, suggesting that Lloyds may be rejecting claims without properly investigating them.
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