The UK economy is in the midst of a crisis as a result of the coronavirus pandemic – and the banks may yet encounter another challenge. This time, from the British public. The banking sector is fearing a second PPI (Payment Protection Service) scandal could result in further payouts, just when it thought the issue had been settled. PPI was sold alongside credit cards, loans and other finance agreements, ostensibly to ensure payments would still be made if the borrower fell ill or lost their job. As many as 64 million policies have been sold in the UK since the Seventies — except many were sold by banks to people who didn’t want or need them, or who could not use them.
The scandal has already cost UK banks £38billion, and now there are concerns new claims could be made, even though the compensation deadline passed last summer.
There have been court cases where, even if the customer wanted the product, huge commission fees meant the PPI deal was unfair and the client was entitled to their money back.
Experts have said that customers could be entitled to claim if they’d previously been denied payments, received only partial refunds or never claimed for mis-sold PPI.
One Citibank customer successfully took the lender to the High Court for £7,954 after they discovered that commission made up 95.2 percent of her policy’s cost.
Both Citibank and Natwest are appealing decisions on such cases.
Martin Richardson, director of legal services at solicitors MoneyPlus legal, said: “This new wave of claims are worth billions of pounds which is why the banks are seemingly doing everything in their power to try and stop them.
“The banks appear to be using their fiscal power to defeat any attempt by the customers to bring valid claims and get back the money that was unfairly taken from them in the first place.
“Across the country the banks are racking up massive legal bills defending claims and then appealing cases knowing the claimants can’t claim their legal costs back if their case started in the small claims court.”
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A spokesperson for NatWest Group, formerly known as RBS, agreed and said what it has set aside so far for PPI is already intended to cover future costs.
However, despite Mr Gordon stating there will be no second “gold rush”, his point leaves the door open to the court rulings adding to the cost of settling existing claims – meaning claimants could be owed far more than originally thought.
The row comes as the UK enters recession after a 20.4 percent contraction between April and June.
The UK’s slump is also one of the biggest among advanced economies, according to preliminary estimates.