The British Bankersí Association has given up on its PPI legal action following the news that Barclays and Lloyds have set aside money to meet compensation claims for the mis-selling of the product.
Customers who have been sold payment protection insurance (PPI) on loans and credit cards will automatically have their policy reviewed by the financial institution that issued it to determine if they are eligible for compensation.
Barclays released the news stating their decision not to appeal against the recent High Court ruling on PPI, and will now begin to process on-hold and new complaints regarding the policies typically taken out on personal loans and credit cards.
The Banks lost their original legal battle in April regarding the assessment of PPI complaints put forward by the Financial Services Authority, which is likely to cost banks £4.5billion in compensation.
Since the High Court judgement of this case, the British Bankersí Association (BBA) has been considering an appeal, until now.
ìIn the interest of providing certainty for their customers, the banks and the BBA have decided that they do not intend to appeal,î commented the BBA in a statement.
ìWe have taken this decision because it is in the best interests of our customers, as well as for Barclays and its shareholders; creating certainty, particularly regarding past issues, is of benefit to all parties,î said Bob Diamond, Barclays chief executive.
Barclays are said to have put aside £1 billion to cover the cost of this compensation and the administration of resolving the issue in the second quarter of 2011.
PPI on Loans and Credit Cards
PPI is usually taken out on personal loans and credit cards to cover the borrower should they lose their job and be unable to meet their monthly repayments.
However, some of the problems reported include having to wait for a long period to receive a pay out after being made unemployed, and borrowers finding they are not eligible to receive a PPI payout after being mis-sold the product.
The new rules will see customers compensated for these faults in the system, and new measures are being put in place to prevent this from occurring in the future.