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Ministry of Justice launches investigation into PPI claims

The Ministry of Justice has launched an investigation into claims management companies after a wave of invalid compensation claims on behalf of customers allegedly mis-sold payment protection insurance.

According to the Financial Times, the move comes after the ministry received a number of complaints from banks over the issue.

Around 80% of PPI claims now come through claims management companies. The FT reports that a vast amount of these complaints are now being rejected.

Santander UK said 40% of the claims it was now receiving were invalid, while Barclays estimated invalid claims at 40-50%. HSBC said that of the claims submitted by claims management companies, a third either had no link to the bank, or no PPI policy had ever been bought. Lloyds is dismissing approximately a third of its claims, while Royal Bank of Scotland says it is rejecting a fifth of claims.

Banks have made a provision of around £6bn for mis-sold PPI, with £1.9bn paid out in 2011. Lloyds has made the largest provision for mis-sold PPI, having set aside £3.2bn.

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