The rush to claim PPI compensation has turned huge numbers of Britons into fraudsters, one of the country’s most senior bankers claims today.
In an extraordinary broadside, Barclays chairman John McFarlane said customers had made an avalanche of dishonest claims for mis-sold payment protection insurance.
It was ‘inconceivable’ that all the claims that had helped fuel a ‘flat-screen television’ buying spree were legitimate, he said.
Barclays chairman John McFarlane (pictured) said it was ‘inconceivable’ that the all of the PPI compensation claims which had fueled a ‘flat-screen television ‘buying spree were legitimate
McFarlane, 71, accused the Government of being ‘complicit’ in the decline of banks by allowing a compensation culture to develop in Britain since the PPI scandal came to light in the early 2000s.
He said: ‘The percentage of fraudulent claims is enormous. We have turned portions of Britain into fraudsters. It was in the Government’s interests [for customers to receive PPI compensation]: consumer spending rose and it weakened the banks, so the Government is complicit here in the decline of the City.’ He added: ‘This is stimulation of the economy by buying flat-screen televisions.’
McFarlane’s comments, made in an interview with The Mail on Sunday, are among the most outspoken remarks on the PPI scandal by a senior banker.
Banks have already been forced to pay £30billion of compensation to customers for mis-sold the insurance, and payouts are expected to surge again as a deadline for claims looms in August next year.
The total amount of PPI sold has been estimated at £50billion – £80billion when interest is included. It was sold to cover customers if they were unable to meet the repayments on loans or credit cards.
In some cases, people were not told this cover had been added to loan or credit card contracts. In other instances, they were sold PPI even though they would never have been eligible to claim on the policy, or despite having protection already.
McFarlane – nicknamed Mack the Knife for his ruthless cuts – said that, while banks should refund where appropriate, the compensation process had been abused. ‘It is almost inconceivable to think that £50 billion was mis-sold,’ he said. McFarlane said claims firms had not been regulated and that Britain’s banks are weaker as a result.
Earlier this month, FCA chief executive Andrew Bailey (pictured) said: ‘We are still dealing with the major loss of public confidence in the financial system’
Barclays profits dropped 29 per cent to £1.7billion for the first six months of the year. It was hit by a new £400million PPI charge and a £1.4billion settlement with US authorities over the sale of mortgage-backed securities in the lead-up to the financial crisis.
According to the Financial Conduct Authority, about 60 million PPI policies were sold over three decades, since prompting almost 20 million complaints. Banks have been repeatedly fined for failing to properly deal with complaints and more than 60 per cent of PPI cases that are referred to the Financial Ombudsman are decided in favour of the consumer.
McFarlane’s comments are the latest sign of an increasing break down of trust between banks and their customers. Earlier this month, FCA chief executive Andrew Bailey said: ‘We are still dealing with the major loss of public confidence in the financial system.’