Barclays have become the first major high street bank to agree to settle PPI (Payment Protection Insurance) claims made before 20th April on a 'no quibble' basis.
The news comes after April's High Court case in which the banking industry failed in its challenge against new rulings on the selling of PPI. Barclays have put aside £1 billion to recompense customers who have been mis-sold the insurance.
Barclays has promised customers who were mis-sold the controversial policy that they will be paid back in full, with 8% interest, as a 'goodwill gesture'.
Barclays's willingness to pay back their customers without internal investigations into the original selling of PPI is something that has been applauded by the financial world as a whole and it is hoped that this move will be the catalyst for other banks to follow suit.
Lloyds banking group have already declared that they will be putting £3.2 billion into their PPI repayment fund, and RBS (£850m) and HSBC (£259m) have also promised large amounts will be set aside to deal with claims.
Chief Executive Bob Diamond said in a statement that Barclays has 'taken this decision because it is in the best interests of our customers, as well as for Barclays and its shareholders; creating certainty, particularly regarding past issues, is of benefit to all parties'.
Certainty is a term rarely associated with PPI, and the controversy that has surrounded it has tarnished the banking world in recent times.
It has been estimated by some experts that 90% of all PPI insurance sales are mis-sold
PPI is fundamentally an insurance that covers the repayment of a loan or overdraft facility provided by a bank if the payee was to become unemployed. However PPI is often sold to customers without careful consideration as to whether or not they would actually require it if they were to become unemployed.
It is not often actively sought out by customers and is often sold without their knowledge, the insurance being attached to the product in many cases.
PPI payments had become a huge money spinner and it was only after the Financial Services Authority (FSA) highlighted the issue in a 2009 report that claims for mis-selling and repayment soared.
Barclays has reported that in the last few months they have received in excess of 40,000 new claims regarding the selling of PPI, a boom partially brought about by April's High Court decision. This flurry of claims has created a bottleneck, especially as all outstanding complaints were put on hold whilst April's judicial trial took place, and the FSA has given the bank certain restrictions with the amount of time they have to sort out all claims that were put on hold.
It has been estimated by some experts that 90% of all PPI insurance sales are mis-sold, and Barclays's decision to reimburse all misled and mistreated customers is undoubtedly an attempt to save face.
In a time of financial insecurity, all banks will be looking to avoid embarrassment and ill repute, and the controversy surrounding the selling of PPI insurance has undoubtedly caused some ill feeling towards some high street banks and has frustrated many customers.
Barclays's decision to put the customer ahead of themselves will be welcomed, and will place pressure on other banks to do the same.