The bill for the UK’s payment protection insurance scandal has climbed past £50bn, making it one of the world’s worst consumer mis-selling scandals of all time. Lloyds Banking Group this week became the latest UK lender to report an unexpectedly large flurry of compensation demands ahead of last month’s final deadline. The bank suspended its share buyback programme and warned that it would have to pay up to £1.8bn on top of the more than £20bn it has already set aside.
This scandal involved signing mortgage and credit card customers up for largely useless insurance that they often did not know about and could not claim on. Complaints surfaced in consumer magazine Which? as early as 1998, and the UK financial regulator first warned of poor sales practices in 2005.
But the products were so profitable — commissions sometimes accounted for as much as three-quarters of the price — that banks kept right on selling. Lloyds, for example, did not stop until July 2010, insisting that it “did not believe it was mis-selling PPI”. Between 1990 and 2010, the industry sold 45m policies, worth £44bn in premiums, and shareholders are still paying the price.