The PPI insurance mis-selling scandal has turned many Britons into fraudsters, one of the UK’s top bankers has claimed. Barclays chairman John McFarlane said it was “inconceivable” that all the claims fuelling a “flat-screen television” buying spree were genuine.
“The percentage of fraudulent claims is enormous,” he told the Mail on Sunday. The Financial Conduct Authority said £32.2bn had been paid to claimants since 2011, with £353m paid in July.
But it is thought that the total cost of mis-sold payment protection insurance policies could be around £50bn, and customers can continue making claims until August 2019. “It is almost inconceivable to think that £50bn was mis-sold,” Mr McFarlane told the newspaper. “We have turned portions of Britain into fraudsters.”
And he accused the government of being complicit in allowing a PPI compensation culture to develop.
He said: “It was in the government’s interests [for claimants to receive compensation]: consumer spending rose and it weakened the banks, so the government is complicit here in the decline of the City… This is stimulation of the economy by buying flat-screen televisions.”
Banks have had to set aside billions of pounds to settle compensation claims. In July, Barclays blamed PPI charges for taking a chunk out of profits in the first half of this year. In August, Lloyds Bank set aside another £460m, taking the amount allocated to settle claims to more than £18bn.
However, Mr McFarlane’s comment drew fire from consumer groups.
Adam French, consumer rights expert at Which?, said: “This is a slap in the face for consumers ripped off by the PPI scandal. Banks still have a long way to go to restore customers’ trust in the industry, and comments like this will not help at all.”
And Gillian Guy, chief executive of Citizens Advice, added: “PPI is one of the largest banking scandals in this country’s history. It was regularly mis-sold, it was expensive and it was often a poorly designed product that people neither wanted or needed.
“It is right that people are able to claim compensation. The banks dragged their feet when problems with PPI were first raised and they are paying the price for that inaction.”
As many as 64 million PPI policies were sold from as long ago as the 1970s. The policies were designed to cover loan repayments if borrowers fell ill or lost their job.
Not all of them were mis-sold, but sales were pushed on a huge scale to people who didn’t want or need them or who could not use them.
The scale of the PPI scandal and its associated compensation claims has prompted concerns that some unscrupulous claims management companies have abused the system.
As well as using management companies, customers can make claims themselves by complaining directly to their provider or via the Financial Ombudsman Service.