Barclays goes it alone on PPI compensation
BARCLAYS surprised its rivals yesterday by promising to settle customer complaints about its mis-selling of insurance with “no questions asked”.
The decision means that the bank is likely to pay out the £1.1bn it has earmarked for the costs of wrongly selling payment protection insurance (PPI) far quicker than other banks will spend their provisions.
Barclays said it is adopting the policy, whereby it will repay all customers whose complaints were frozen before 20 April the cost of the PPI they bought plus interest of eight per cent “as a gesture of goodwill”.
But Barclays’ rivals will not follow suit, they said yesterday. Lloyds has put aside £3.2bn, RBS £850m and HSBC £269m to compensate buyers of PPI, which covers loan payments if a borrower loses her job or falls ill.
Instead, the other banks will take advantage of a temporary extension in the time they can take to handle complaints that was granted by the FSA yesterday after a request from RBS.
The deadline for responding to complaints was increased from eight to 12 weeks due to a backlog of grievances frozen after the banks launched a lawsuit against an FSA ruling on PPI. They lost the case and an industry-wide consensus to appeal fell apart after Lloyds’ chief, Antonio Horta-Osorio, unilaterally withdrew from the case.
Barclays’ move marks the second time a bank has out-manoeuvred its rivals by taking a unilateral, high-profile decision on PPI.