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June 13, 2011 11:18 am
Barclays is to pay out compensation to all customers who believe they were mis-sold loan insurance and whose complaints are currently on hold, but the rest of the UK’s largest retail banks said they had no plans to replicate Barclays’ decision.
The bank has set aside £1bn to cover the cost of compensation for tens of thousands of borrowers who say they were wrongly sold payment protection insurance, which covers loan payments if borrowers lose their jobs or are too ill to work.
Complaints lodged before 20 April, when a dispute over new FSA rules came to an end, will be repaid at the full cost of the premium, plus interest at 8 per cent, ”as a gesture of goodwill”.
Complaints made after this date will be examined individually.
Consumer groups said the decision to repay money with no questions asked would help Barclays regain public confidence. However the bank’s rivals said they would not be making a similar offer to customers.
Lloyds Banking Group, which has made the largest provision for PPI compensation at £3.2bn, said it would continue to review every complaint individually.
RBS, which has set aside £850m, and HSBC which has factored £270m for repayments, both indicated that they would not be making any sweeping payments and would continue to process complaints one by one.
The Financial Services Authority has agreed to allow Barclays, Lloyds Banking Group and RBS extra time to allow them time to deal with the backlog of PPI claims.
Complaints made before the end of August must be responded to within 16 weeks, and those made between September and December 2011 must be responded to within 12 weeks. Other providers must still respond to complaints within the usual timeframe of 8 weeks.
The repayment plan draws to a close a long running dispute between banks and customers which has so far resulted in 240,000 official complaints.
In May banks relinquished a legal challenge over new FSA rules on PPI mis-selling claims and announced that they would begin the process of compensation.
Consumer campaigners expressed disappointment that the banking industry would not be following Barclays commitment to repay all complaints on hold, and pointed out that looking at cases individually would be more resource intensive.
“Banks have a lot to do to re-build their reputation after over a decade of mis-selling PPI and then mishandling complaints about it,” said Which? chief executive, Peter Vicary-Smith.
“The sooner the banking industry can consign the PPI mis-selling scandal to the history books, the better.”
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