Home Legal Featured : Britain’s banks prepare for huge client compensation

Featured : Britain’s banks prepare for huge client compensation

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Britain’s banks are allocating billions of  pounds to compensate clients who were mis-sold credit insurance, in a fresh  blow to a sector seeking to gain public trust after the financial crisis.

Industry body the British Bankers’ Association (BBA) on Monday said it  would not appeal last month’s high court ruling that called for tighter  regulation of payment protection insurance (PPI), which has been mis-sold for  years.

“We don’t always get things right for our customers; when we get them  wrong, we apologise and put them right,” Barclays chief executive Bob Diamond  said on Monday as the bank announced plans to put aside £1.0 billion in  compensation.    “That’s our commitment to our customers, and it applies to the way in which  we will deal with PPI complaints,” Diamond added.

Consumer groups hailed the development.    More than three million people are in line for compensation, while the  total cost to banks is estimated at up to £9.0 billion (10.3 billion euros,  $14.9 billion) — which would be Britain’s most expensive scandal of its kind.

Also on Monday, Europe’s biggest bank HSBC said it would be making $440  million (£270 million, 307 million euros) available for PPI clients.

Lloyds Banking Group last week said it was setting aside a much larger sum  of £3.2 billion.

“This is a wonderful day for consumers,” said Martin Lewis, a leading  campaigner on behalf of PPI clients.

“For once the banks have done the right thing and backed down. As much as  £9 billion that was wrongly taken could now be paid back,” added the creator  of website MoneySavingExpert.com.

PPI, which covers repayments on credit products for consumers who for  example lose their jobs through illness, has turned out to be highly  controversial.

It has been found that people who could never benefit from the insurance,  such as those on state benefits or in some case the self-employed, were  nevertheless sold policies.    Britain’s Competition Commission has since banned simultaneous sales of PPI  and credit products, such as personal loans or mortgages.

Peter Vicary-Smith, chief executive of consumer advice group Which?, also  expressed delight at Monday’s developments.    “Hopefully this will be a watershed moment in how banks treat their  customers. It was a colossal error of judgment by the BBA to have brought this  case in the first place, which has even further diminished the banking  industry’s reputation in the eyes of consumers.

“PPI was mis-sold and complaints about it mishandled on an industrial scale  for well over a decade. Now the industry must make amends by quickly  reimbursing the millions of people it has ripped off,” he added.

London, May 9, 2011 (AFP)