The PPI scandal ends at last – but the nuisance calls will keep coming

Of all the stains on the reputation of UK banks, the PPI scandal is surely the most shameful, the most revealing of low human behaviour and the one with the most far-reaching consequences. Between 1990 and 2010, some 30 million customers were sold Payment Protection Insurance, supposedly designed to cover them if they became unable to make debt repayments; no one knows what proportion of those policies were ‘mis-sold’, but compensation has so far amounted to more than £36 billion, plus £12 billion of admin costs for the banks. As the final claims deadline approached last Thursday, Lloyds — the worst offender, with RBS in second place — was still receiving PPI-related calls at the rate of 190,000 a week.

The effect has been, first, to intensify the erosion of trust in banks and the wider financial services industry — while launching a cynical boom in claims soliciting, much of it based on nuisance phone calls and advertising that presented payouts as a potential lottery win for consumers who never realised they had bought PPI in the first place. Also eroded were the banks’ capacity to lend to business customers and to pay dividends to shareholders, including pension funds — while the flow of compensation payments, peaking at £6.3 billion in 2012, represented an unexpected economic boost that is now dribbling to an end. But that was also a shift of resources towards short-term consumer spending that might otherwise have contributed to long-term capital investment.

Car-dealers, conservatory builders and package-holiday providers will be among the biggest losers. Thousands of contract staff hired by banks to process PPI files will lose their jobs, as will some of the call-centre operatives who have plagued our phone lines over the past few years. But that, I fear, is one residue of PPI that won’t go away.