Monday, March 04 16:24:59
The number of claims against British banks for mis-sold insurance on loans and mortgages has reached "staggering" levels and will take years to pay back, the head of the Financial Ombudsman Service said.
The industry has already set aside about 14 billion pounds to deal with the biggest mis-selling scandal in British history and banking sources have told Reuters the total cost could reach 25 billion pounds.
"We're assuming that this is a multi-year challenge," Chief Financial Ombudsman Natalie Ceeney told Reuters in an interview.
Payment Protection Insurance (PPI) was meant to protect borrowers against sickness or redundancy but the policies were often sold to customers who did not want or need it.
The Ombudsman, which steps in when banks and their customers cannot reach an agreement, is currently seeing as many as 2,500 complaints relating to PPI each day.
"The scale of the current volume has taken everyone by surprise. They have been at a staggeringly high level for a good few months now."
The British Bankers Association, a lobby group, has asked Britain's financial regulator to set an April 2014 deadline as the industry strives to move on from the affair.
Ceeney said any time limit on claims must be in the interests of consumers as well as banks and that it could be difficult to ensure that every customer entitled to compensation is made aware of the fact.
"There are some real challenges in setting time-bars in the interests of consumers as well as banks," she said.