(Photo: Reuters)
(Photo: Reuters)

UK banks have paid nearly £9bn over the past two years to compensate customers mis-sold payment protection insurance, in what has become the most expensive financial scandal in British banking history.

According to the Financial Services Authority's monthly report entitled PPI Refunds and Compensation, banks paid customers £439m in January this year, bringing the total amount of compensation to £8.9bn since January 2011 [Fig 1].

According to the data, published on the FSA's website, the number of financial companies paying customers compensation also rose, as 24 firms accounted for 96 percent of complaints about the sale of PPI in 2012, compared with 16 firms making up 92 percent of PPI complaints from the previous year.

Only a few days ago, the Financial Ombudsman Service (FOS) said that during the last six months of 2012, new complaints rose by 110 percent, reaching a record total of 283,251.

In data published on the ombudsman's website, the FOS added that complaints about PPI made up nearly three quarters of the total for the second half of last year, bringing the total amount of complaints to FOS about PPI to 600,000.

Notably, five financial services groups accounted for 78 percent of all new PPI cases received between 1 July and 31 December 2012, signalling the increased use of claims management companies.

In mid-January this year, IBTimes UK reported that the Financial Services Authority and the banking industry are considering implementing a deadline for PPI mis-selling claims in order to slow down the backlog in disputes and billions of pounds in payouts.

(Chart: FSA's monthly refunds and compensation report)
(Chart: FSA\'s monthly refunds and compensation report)