Compensation payouts hit £65m in June as High Court ruling kicked in

MARGARET COLE, FIRMS CLEARING, PPI BACKLOGS
MARGARET COLE, FIRMS CLEARING PPI BACKLOGS

The amount of compensation paid to consumers who were mis-sold payment protection insurance jumped by 76% between May and June.

Figures published by the Financial Services Authority last week reveal that PPI redress paid out by banks increased by 48% between April and May, from £25m to £37m, and then by 76% in June to £65m.

During the first six months of 2011, £215m was paid in compensation, of which May and June’s figures accounted for almost half 47% at £102m.

The data comprises the redress made by 16 firms, representing 92% of PPI complaints in the first half of 2011 and includes both ex-gratia payments and those cases settled by the Financial Ombudsman Service.

The FSA says the amount of compensation rose significantly in May and June because the High Court rejected the British Bankers’ Association’s legal challenge to the FSA’s proposed redress measures for PPI on April 20.

Margaret Cole, interim managing director of the FSA’s conduct business unit, says: “While the amount of redress paid in May and June is unsurprisingly large in the wake of the judicial review, looking ahead we expect the amounts to vary as firms clear their backlogs while dealing with complaints as well.”

The regulator says it is monitoring firms’ progress to ensure they are compensating consumers’ appropriately, and will continue to publish redress data on a monthly basis.

In recent months, Barclays has made a provision of £1bn for PPI claims while Lloyds Banking Group has set aside £3.2bn and Santander £538m.

In June Barclays announced that as a gesture of goodwill it was contacting all customers whose PPI complaints were put on hold on or before April 20 to offer to settle their case in full.