The major UK banks are reporting that they received many more payment protection insurance (PPI) complaints than they were expecting in the days prior to the August 29 deadline. For example, Lloyds Banking Group reported that it was sometimes receiving 800,000 PPI enquiries per week in the period prior to the deadline.

This has led to some of them deciding to significantly increase their PPI compensation provision. Banks and other firms that sold PPI will now be investigating complaints they received on deadline day, or in the preceding weeks, and compensation will need to be paid to these customers if either the firm or the Financial Ombudsman Service decides that their complaints should be upheld on the grounds of mis-selling or an undisclosed commission payment.

Lloyds Banking Group has said its PPI provision will need to be increased by at least £1.2 billion, and maybe as much as £1.8 billion, which would mean they would have set aside £22 billion to cover claims relating to this product. The bank’s chief executive António Horta-Osório confidently predicted in 2011 that his group would only need to pay £3.2 billion in PPI redress. The last-minute rush to make a PPI complaint has also forced Lloyds to scale back its share buyback programme by approximately one third. The £22 billion bill exceeds the combined £15 billion in annual profits reported by Lloyds since 2011.

Barclays will be increasing its PPI reserve by between £1.2 billion and £1.6 billion, potentially taking its total to £11.2 billion.

Royal Bank of Scotland’s PPI compensation bill will increase by £600 million to £900 million, which potentially takes its total to £6.2 billion.

Challenger bank Clydesdale is to make additional provision of between £300 million and £450 million, which could take its total to £2.7 billion.

HSBC has set aside £9.6 billion since the start of the PPI mis-selling saga and Santander’s latest figure is £1.5 billion.

Some industry analysts are now predicting that the total compensation bill for the scandal will reach £53 billion. £36 billion of this has already been paid out.

Neil Wilson, an analyst at Markets.com, criticised the repeated failures of the banks to correctly estimate how much PPI compensation they would need to pay out, with many banks having increased their redress provision on many occasions. He said that “banks have consistently and systematically failed to account properly for PPI claims” and turning his attention to the unfortunate shareholders whose expected dividends have been badly hit by the ever-rising cost of PPI, he said “they should be banging down the board room doors and demanding the heads of those responsible”.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article