Both banks and those involved in the claims industry have said that 2013 is likely to see more than £6 billion paid out to victims of the Payment Protection Insurance mis-selling scandal. During 2012, over £6 billion was paid out by the banks, more than £500,000 a month.
This is an extraordinary turnaround for the banks, who previously refused to make any payouts for years. It’s not as if they didn’t resist making any payments though, with plenty of legal wrangling delaying the payments for years.
The main upturn of this huge figure being injected into the economy is that many forecasters believe it will result in a big jump in spending for those who receive the compensation. Payouts like this are often spent rather than saved, and many victims will be receiving years’ worth of back payments along with either a goodwill payment, further compensation or the interest from the years that they were paying on top of the base figure.
This is a boost that rivals many of the government’s own methods of boosting the economy, with the exception of those payments which go directly to the banks.
However, with some of the banks that will be making payouts partly backed by the state, there will still be a burden placed upon the tax payer. It’s also possible that, given the economic climate and the ongoing problems in the eurozone and elsewhere in the global economy, consumers will demonstrate a thriftier attitude than they have in the past, saving the money rather than splurging it.
With the banks expected to continue making PPI payments and dealing with claims into 2014 and beyond, these injections into the UK economy don’t appear to be ending any time soon. The banks are even required to write to customers who may have bought PPI on loans or credit cards now, which is sure to keep the flow of claims coming thick and fast.