AP, LONDON, May 9: British banks on Monday gave up the fight against compensating customers who were missold payment protection insurance on mortgages and other loans, and now face a compensation bill estimated at 4.5 billion pounds ($7.4 billion).
The British Bankers' Association said it took the decision in the "interest of providing certainty" for bank customers.
"We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities," the association said, without specifying the issues.
The Financial Services Authority has estimated that banks will pay a total of 4.5 billion pounds to settle claims
Natalie Ceeney, who heads the Financial Ombudsman Service, said the agency had been received up to 5,000 complaints each week from consumers since October.
"We will be working with the banks, over the coming weeks, to ensure that consumers' complaints are dealt with fairly and promptly," Ceeney said.
Lloyds Banking Group last week was the first to break ranks, taking a 3.2 billion-pound provision for repayments to customers. Barclays announced Monday that it had also decided against joining an appeal, and was making a provision of 1 billion pounds for compensation.
The Financial Services Authority has told banks that customers must be told if the insurance is optional, and they must be advised of their right to cancel. The agency also said the seller must be sure that the customer is eligible to claim under the policy, since some exclude nonresidents, the self-employed or people with certain health problems.
The banks had argued that the FSA's standard should not be applied retrospectively.
