Banks face an even bigger bill over PPI
The UK's high street banks could be facing a much bigger bill for mis-selling payment protection insurance (PPI) than they have planned for.
Already the estimated bill to compensate victims of the nation's biggest-ever financial scandal is close to £25bn, but that figure could soon start to escalate after the City watchdog warned that it was considering new rules on how and why customers should be compensated.
The Financial Conduct Authority (FCA) admitted it could be forced to introduce the new rules following a landmark court ruling which could open the door to a landslide of fresh claims for compensation.
The latest wrinkle to the scandal centres on alarmingly high commission payments to lenders and advisers. It was revealed that intermediaries were charging almost three-quarters of the cost of cover as their commission. But with many of the commissions hidden from victims, they have not previously formed part of compensation claims.
In November Lord Sumption ruled that failing to disclose commissions led to a "sufficiently extreme inequality of knowledge and understanding" and that there was a "tipping point" in that inequality. The FCA revealed last January that it was reviewing trends for PPI complaints and raised the prospect of setting a time limit on claims.
The regulator said any changes in light of the Plevin case would be part of that review and it expected to report over the next few months, when it would confirm whether compensation would be awarded for PPI sales that involved undisclosed commissions.