Lloyds and Barclays struck by $4 billion insurance mis-selling claims
LONDON (Reuters) - Lloyds and Barclays on Monday said a surge in late claims could see them pay out around $2 billion more each to settle Britain’s costliest consumer banking scandal, the mis-selling of payment protection insurance (PPI).
Lloyds on Monday said it will set aside up to an extra 1.8 billion pounds ($2.2 billion) to settle PPI claims, while Barclays later said it would set aside between 1.2 billion pounds and 1.6 billion pounds.
Lloyds also said it was suspending its 2019 share buyback programme.
The huge provisions show how banks in Britain are still battling with the legacy of the scandal, even after the Aug. 29 deadline for consumers to complain, as a rush of customer enquiries in the run-up to that date forced them to set aside more compensation money.
PPI policies were sold alongside a personal loan or mortgage to cover repayments if borrowers fell ill or lost jobs, but many were unsuitable.
Britain’s High Court in 2011 ruled that consumers could retroactively seek compensation for mis-sold policies.
The subsequent rush of claims has been a boon for consumers, egged on by a rise in so-called claims management companies, with lenders having paid out more than 36 billion pounds in total and the final tally expected to top 50 billion pounds.
RBS (RBS.L) said last week it faced additional costs of up to 900 million pounds, while Clydesdale Bank made a fresh 300-450 million pound provision.
As Britain’s biggest domestic lender, Lloyds has been the most exposed to PPI and has already paid out more than 20 billion pounds.