Oct. 29 - The compensation bill lenders have had to pay for mis-sold payment protection insurance is reportedly set to surpass 10 billion pounds this week, putting it on course to become the most aggressively mis-sold product in UK banking history. Hayley Platt reports.
10bln pounds - that's 16 billion dollars - is today's Daily Digit in Europe. It's reportedly the compensation bill the UK's big five banks will top this week for mis-sold payment protection insurance. And city analyst David Buik says it could go even higher. SOUNDBITE: David Buik, city analyst, saying (English): "A lot of people are of the opinion that by the time all these claims have been met it could cost the banking sector in London 16 bln pounds." Lloyds share of the bill is estimated to be around £4.3 billion, twice the amount of any other lender. Barclays has set-aside £2 billion and HSBC just over £1 billion. The smallest bill is Santander's at £0.7 billion. Now in an attempt to clean up some of the banking industry's bad practices, Lloyds is reportedly scrapping all incentives linked to product sales replacing it with performance related rewards linked to customer service. SOUNDBITE: David Buik, city analyst, saying (English): "Morally it's just and exactly what they should do. These impairment charges that the banks are going to have to make are going to have a devastating effect on profitability, will clearly damage the payment of dividends, without any question of any doubt and much more to the point will continue to have an adverse effect on bank lending." PPI has become one of the worst consumer financial scandals in British history. Policies were designed to cover loan repayments taken out by borrowers if they fell ill or lost their job. But they were often sold to people who either didn't need or want them. Earlier this month Britain's Financial Ombudsman said it was receiving up to 400 complaints an hour from consumers who believed they'd been sold unwanted insurance products. The average compensation claim was around 2,750 pounds.