PPI row payouts hit £1.9bn in 2011

Banks paid out almost two billion pounds over the mis-selling of PPI last year, the Financial Services Authority has said

Published: 12:47pm, 22nd February 2012
Updated: 3:02am, 23rd February 2012

Nearly £2 billion of compensation payments were made last year to settle claims from the mis-selling of payment protection insurance (PPI).

The figure of £1.9 billion revealed by the Financial Services Authority included £441 million in December - the largest monthly sum so far.

However, consumer group Which? urged banks to do more to step up the pace of redress and help consumers avoid the use of claims management companies.

Which? executive director Richard Lloyd said last year's compensation of £1.9 billion was still only a quarter of what lenders expected to refund.

He added: "Too many people are still finding the claims process too lengthy, the banks must streamline the process to make it easier for people to claim. Otherwise this leaves an open goal for claims management companies that charge people a hefty fee for putting in a claim which is easily done yourself for free."

Which? said anyone who thinks they may have been mis-sold PPI should contact their lender directly or visit its website at which.co.uk.

The banks have set aside an estimated £7.6 billion to compensate consumers who were mis-sold PPI but based on an average fee of 30% the compensation could be worth more than £2 billion to claims firms.

Barclays, which has set aside £1 billion to cover mis-selling claims, has issued figures showing PPI fuelled a 67% jump in the number of complaints in its general insurance and protection business to 122,922 in the second half of 2011.

It has not disclosed how much it has repaid customers so far but said excluding the PPI figure its volume of complaints was down 29% in the half-year compared with 2010.

Consumers took out PPI to help repay their loans if they fell ill for a long period or became unemployed, but a widespread mis-selling scandal emerged.