Royal Bank of Scotland was flooded with payment protection insurance claims on deadline day last month, in an ominous sign for banks as the PPI bill nears £50bn.
RBS saw an unprecedented number of claims on August 29 — about 200,000 — higher than the total number in the four months to the end of April, sources said.
The taxpayer-owned bank was forced to announce last week that it would make a provision of up to £900m in its next quarterly results in October. With the average payout worth £2,000, RBS’s bill for the final day of claims alone could hit £400m.
Tony Shields, chief executive of claims manager Crystal Legal, said the frenzy in July and August “was like we had the last tin of beans on Brexit day”.
RBS had paid out £4.9bn on PPI as of June. The share price has fallen by about 17% over the past year to 188p.
PPI was meant to provide cover for borrowers unable to make repayments if they fell ill. A torrent of claims was unleashed after Lloyds Bank boss Antonio Horta-Osorio broke ranks in 2011 by announcing it would pay compensation. Banks had paid out £36bn from 2011 to the end of June, with billions more in administrative expenses.
Analysts warn that Lloyds, Barclays, and the Co-operative Bank could reveal furthr provisions running into hundreds of millions in coming weeks.
Lloyds, which has set aside almost £20bn to date for PPI as the biggest seller, is likely to be sifting through vast numbers of fresh complaints.
The bank earmarked £550m at its half-year results in July and warned at the time that it had seen a large jump in claims volumes. The bank still had about £1bn spare in its compensation pot.
Clydesdale and Yorkshire Banking Group (CYBG) came under fire last week when it said it would add up to £450m to its PPI compensation pot after a surge in complaints. The shares tanked by a fifth on the day, closing at 113.4p on Friday.
Bankers said vans had been arriving with boxes of PPI claims, creating a backlog. Santander’s website crashed because of huge volumes, so the bank extended its PPI deadline by a day. “The sheer volume of stuff coming in . . . there are piles of boxes,” one banker said. “There is clear evidence that this is being driven by claims management firms.” Bankers believe that many claims are “vexatious”.
Both RBS and CYBG said that the official receiver, a civil servant who looks to claw back money for creditors of the insolvent including HMRC, had put in claims on behalf of people in bankruptcy.
Shields said: “No one can accuse people of wasting time. The fact that banks are setting aside so much suggests they know the claims are not vexatious.” He said many claims had been held up in the estates of people who had died since 1985, and could amount to about £18bn.