PPI fine payments hit £215m in first six months of 2011

BANKS have paid out a total of more than £215m in compensation so far this year to clients that were mis-sold payment protection insurance (PPI), figures published by City regulator the FSA revealed yesterday.

The data released showed that 16 banks – representing 92 per cent of all PPI claims made – had so far spent £215m on claims, with almost half of the damages paid since the High Court rejected an appeal against the new rules in April.

Payouts increased significantly after the appeal ruling compared to earlier in the year, with £37m and £65m spent in May and June respectively.

Banks including Lloyds, RBS and Barclays have made hefty provisions to account for one-off compensation charges, with Lloyds putting aside a total of £3.2bn to handle claims.

The regulator also said yesterday it was planning to introduce a new “health alert” system to warn about risky financial products in a bid to halt the string of costly mis-selling scandals in recent years.

Alerts to firms as well as to consumers will be public, and financial lawyers are already warning clients the regulator is keen to make an example of a company.

“I expect us to start issuing warnings soon,” said Margaret Cole, the FSA’s acting managing director of business conduct.

“We’ve been asking for minutes of product approval meetings and there are examples where we have told a firm to go back and add features to a product to bring about greater comfort on our part,” Cole said.