So Lloyds’ decision to set aside £3.2bn ($3.9bn)to meet expected PPI claims seemed excessive. At the time, estimates of the total PPI mis-selling bill, even after the court ruling, were in the region of £4.5bn ($5.5bn).

The size of the provision took the financial world by surprise. Less than a week later, Lloyds Banking Group announced the first of what was to become a long line of provisions against PPI claims. Fearful of a vast increase in claims, the British Bankers’ Association launched legal action against the FSA on the grounds that retrospective application was unfair. In December 2010, the FSA had imposed a new set of rules to end PPI mis-selling. But customers persisted: by January 2011, the U.K.’s financial overseer ('Ombudsman”) was inundated with complaints and struggling to cope.īut the floodgates really opened in 2011, after a landmark court ruling. Banks, understandably, didn’t want to pay compensation: they rejected a high proportion of claims and made it difficult for customers even to pursue claims. The consumer watchdog Which? reported that one in three PPI customers had been sold insurance that could be worthless.Ĭompensation claims for mis-sold PPI escalated rapidly. In 2008, Liverpool Victoria Banking Services was fined £860,000 ($1.05m) for adding PPI to loan contracts without customers' knowledge, and the Alliance & Leicester bank was fined £7m ($8.5m) for using high-pressure sales tactics to force customers to accept PPI.

Dubbing PPI a “protection racket”, the CAB called on insurers, lenders and regulators to “take urgent action to improve payment protection insurance”.įines for PPI mis-selling began in 2006, when the (then) Financial Services Authority (FSA) hit Regency Mortgage Corporation with a £56,000 ($68,292) penalty for selling PPI to mortgage customers who were already insured or would have been unable to claim. The picture was particularly bleak for people in financial difficulties who were taking out consolidation loans: a new PPI contract could be attached to each rolled-over loan, resulting in escalating premiums and increasing indebtedness. Furthermore, the CAB reported, people were being sold policies that they did not need or were unsuitable for them. In 2005, the U.K.’s Citizens’ Advice Bureau (CAB) complained that there were so many exclusion clauses in the contracts and administrative barriers to claiming that many people couldn’t make successful claims. PPI was expensive: premiums could raise the cost of a loan by up to 50%.

Lloyds tsb mortgage ppi claims