Lloyds and Barclays Monday said a hike in late claims could see them pay out nearly $2 billion more each to settle Britain’s most expensive consumer banking scandal, the mis-selling of payment protection insurance (PPI).
Lloyds said Monday it would set aside as much as an extra 1.8 billion pounds ($2.2 billion) to settle PPI claims, while Barclays (BARC.L) later said it would set aside between 1.2 billion kilos and 1.6 billion pounds.
The large provisions show how banks in Britain are still battling with the legacy of the scandal, even after the Aug. 29 deadline for customers to complain, as a rush of customer inquiries in the run-up to that date compelled them to put aside more compensation cash.
PPI policies had been sold alongside a personal loan or mortgage to cover repayments if borrowers fell ill or lost jobs; however, many were unsuitable.
Britain’s Central Court in 2011 required that consumers could retroactively seek compensation for mis-sold policies.
The subsequent rush of claims has been a boon for customers, egged on by a rise in so-called claims management firms, with lenders having paid out over 36 billion pounds in total and the final tally anticipated to top 50 billion pounds.
RBS said last week it confronted additional costs of as much as 900 million pounds, whereas Clydesdale Bank made a new 300-450 million pound provision.
As Britain’s most significant domestic lender, Lloyds has been the most exposed to PPI and has previously paid out over 20 billion pounds.
Lloyds said Monday it had received 600,000-800,000 requests for details about PPI per week in August, well above its expectations of nearly 190,000 per week.