- The Observer
54 25.08.19 Business
The end of a scandal: banks near a
fi nal release from their PPI liabilities
I
t’s a date some in Britain
have been dreading, but that
for others can’t come too
soon. No, not 31 October, the
Brexit date, but 29 August –
the fi nal deadline for com-
plain ts about payment protection
insurance (PPI).
At 11.59pm on Thursday , the UK’s
fi nancial regulators will bring down
the shutters on Britain’s costliest-ever
consumer scandal.
At the latest count, £36bn has been
paid out by UK banks to compensate
people who bought often-worthless
insurance cover, thinking it would
help them repay debts in the event of
sickness or unemployment.
Of that, £2bn was paid between
1 January and 30 June this year. The
total bill has hit £48.5bn once admin-
istration costs are included – five
times the cost of the London 2012
Olympics, according to the thinktank
New City Agenda.
And with an offi cial “now is thetime to act” advertising campaign in
full swing, and claims management
companies engaged in a fi nal push to
grab a share of the spoils, those num-
bers will almost certainly rise.
It is not just the claims firms –
which have pocketed billions of
pounds of the compensation paid
to victims, and in many cases have
plagued millions of people with spam
text messages and nuisance calls –
that stand to lose out from the end of
this gravy train.
There is an argument that the pay-
outs resulting from the scandal –
which at one point averaged £2,750
a head – have amounted to a sizable
fi scal stimulus that has helped keep
the wheels of the UK economy turn-
ing over the past decade.
In many cases, that handout of free,
no-strings cash has been a welcome
windfall, quickly spent on a holiday or
home appliances, put towards a new
car, or used to pay for home improve-
ments or weddings. And at one pointAs a rush of applicants
begins before the
deadline on Thursday,
the loss of payouts
will have a big impact
on the fl ourishing
claims industry – and,
some analysts fear,
the wider economy.
Rupert Jones reports
the boom in jobs linked to the pro-
cessing of all those claims registered
in the offi cial labour market statistics
as one of the fastest-growing areas of
employment.
In early 2014, the then econom-
ics editor at the BBC, Robert Peston,
wrote that one of his “nagging wor-
ries” about the British economy was:
“What happens when the PPI pay-
ments stop fl owing?”
Well, we are about to fi nd out.
As many as 64 million PPI pol-
icies were sold in the UK, mostly
between 1990 and 2010, and some as
far back as the 1970s – but very often
this cover was mis-sold. Banks and
other fi nancial institutions pushed
the policies alongside loans, mort-
gages, credit cards and other deals,
with the promise that they would
pay out if borrowers found them-
selves unable to work owing to ill-
ness, injury or redundancy. However,
in many cases, the policy exclusions
meant customers could never makea claim. The most frequent exclusion
was “self-employment”.
Banks have been repeatedly forced
to announce that they are setting
aside yet more cash to cover PPI
claims. Lloyds Banking Group has
been landed with the biggest bill: to
date, just over £20bn.
With days to go until the deadline ,
last week saw a late fl urry of activ-
ity as genuine claimants fi nally g ot
around to submitting their com-
plaints, and others tr ied their luck.
The Financial Conduct Authority
(FCA) – which has been running a
major TV advertising campaign to
raise awareness of the deadline –
said that in the past eight weeks it
had experienced a 420% surge in
website activity and a 269% increase
in calls compared with the previous
eight weeks.
Lloyds revealed late last month
that while it had been fi elding about
70,000 pre-complaint information
requests relating to PPI each week,