The PPI scandal is set to cost the industry more than £50bn, but billions are likely to remain unclaimed as the claims deadline approaches next week.
Figures collected by think tank New City Agenda showed banks have already paid a total of about £48bn in PPI compensation, with an extra bump expected from last minute claims as the deadline approaches on August 29.
Lloyds Banking Group tallied the highest payout so far, with PPI compensation costing the lender £20.1bn since the scandal emerged.
This is more than double the £9.7bn Barclays paid out, followed by Royal Bank of Scotland at £5.3bn.
HSBC has paid about £3.8bn to date while PPI has cost Yorkshire/Clydesdale Bank a total of £2.6bn.
|Bank||Cost so far|
|Bank of America (MBNA)||£1.8bn|
|Northern Rock / UKAR||£0.6bn|
But according to New City Agenda, this is only about half of the amount actually owed to consumers as major banks have only made contact or received complaints from around half of the consumers they had sold PPI to since 2000.
Payment protection insurance, which was missold to thousands of consumers from as early as the 1980s, was sold alongside finance agreements which insured payments were made if the borrower was unable to make them due to sickness or unemployment.
The full extent of the misselling of PPI was exposed in 2005/06 when the Financial Services Authority — now the FCA — started fining banks over the sale of such protection.
It has since emerged that the misselling was fuelled by staff incentive schemes and a sales culture which led to bank staff being put under heavy pressure to sell PPI and some senior bonuses depending on sales rates.
The FSA estimated that £44bn of PPI premiums was sold by banks between 1996 and 2012 alone, with profits of at least £21bn.
According to the FCA, banks have upheld around 71 per cent of complaints made about PPI misselling, but the figure rises to 80-90 per cent when including complaints about the bank failing to disclose excessive commissions for selling PPI.
The deadline set by the Financial Conduct Authority for consumers to complain to their bank or lender about missold PPI falls next week (August 29), but those that are rejected could still be heard by the Financial Ombudsman Service for six months after that date.
As of May 2019, FCA data showed banks had paid £35.7bn in PPI compensation, the total gradually falling from 2012 but peaking in 2018 as the deadline approached.
The figures for 2019 are expected to increase once more with last minute complaints.
PPI was profitable for banks because the level of claims paid out was low, according to New City Agenda.
The group told FTAdviser that just 16 per cent of the money collected by PPI premiums was paid out in claims between 2002 and 2006, which meant PPI sales represented a significant percentage of retail banking profits in the years in which it was sold.
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