Bankers give up PPI legal battle

The British Bankers' Association (BBA) has given up its legal battle over the mis-selling of payment protection insurance.

The BBA lost its High Court challenge against new FSA rules on mis-selling PPI being applied retrospectively, and said it had no plans to appeal against the decision.

It is thought that in the wake of the announcement thousands of customers will be set to receive compensation.

The decision comes after it was revealed last week that Lloyds Banking Group was pulling out of any further legal action and setting aside £3.2 billion to compensate customers.

Barclays has also announced that it will pull out of the legal fight and said it will begin to process complaints from customers which were previously on hold.

Barclays has set aside £1 billion as a provision against claims, while taxpayer-backed Royal Bank of Scotland also confirmed that it will not be contesting the ruling on PPI.

The bank has yet to provide an update about how much the compensation claims are likely to cost it.

RBS added that the decision was an important step for the banking industry as it sought to restore the confidence and trust of consumers.

The furore surrounding PPI comes after banks received widespread complaints that they sold PPI to customers who were not eligible to benefit from the products.

The huge amount set aside by Barclays and Lloyds suggests that the final PPI compensation bill for the whole industry will be far higher than the £4.5 billion originally estimated by the Financial Services Authority (FSA).

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