The City watchdog is preparing a £42m advertising push later this month related to the mis-selling of payment protection insurance (PPI), as bank payouts to customers nudge £30bn.
The Financial Conduct Authority (FCA) said on Monday that payouts totalled £260m in May alone, the highest monthly value since June 2016. Since 2011, £27.4bn has been paid out to customers.
Many more claims are expected, potentially adding billions to payouts. Banks have set aside around £40bn to deal with PPI claims, with both Lloyds and Barclays last month increasing their provisions by £1bn and £700m respectively.
Banks face added pressure later this month when the FCA kicks off an advertising campaign encouraging customers to claim PPI compensation, two years before the final deadline for claims. The £42.2m scheme, which is being funded by lenders, is due to kick off on 29 August.
It is estimated that only one in four PPI claims has been lodged so far. Nick Baxter, chairman of the Professional Financial Claims Association (PFCA), calculates that around £50bn of PPI was mis-sold and that, because of interest, the cost to banks would be up to £100bn if it was all claimed. This would mean that less than 30 per cent has so far been paid out.
“We’re nowhere near through this,” he told City A.M. “The big problem for consumers is that there is a time bar starting to tick.”
Baxter added: “If it was all done properly and banks had to contact customers they’d sold things to… the bill would be nearer £100bn.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, added that the £42m FCA advertising campaign could drive up PPI costs for banks although he would find it "remarkable" if the full £100bn figure materialised.
“I would expect that we might get further provisions to come, but it would be an incremental change,” he told City A.M. “As we get closer towards the deadline, it may be that that ramps up further. A deadline is a motivating thing for people. So it may be that that increases further.”
City A.M. has learned that a legal challenge to the 2019 deadline was rejected in the High Court last week. On Friday, the court refused to give permission for We Fight Any Claim to challenge the date through a judicial review.
An FCA spokesperson said: “We are extremely pleased that the court has refused permission to bring judicial review proceedings.
“Introducing a deadline on PPI complaints is the right thing for consumers and we look forward to launching our campaign on 29 August.”