By Ed Monk
PUBLISHED: 09:01 EST, 12 November 2012 | UPDATED: 09:05 EST, 12 November 2012
The CBI has called for government to 'draw a line' under PPI compensation payments to ease the financial burden on banks.
The business lobbying group also warned that allowing compensation claims for the sale of products based on Libor - the manipulation of which several banks stand accused - would be 'a dangerous precedent'.
CBI director general John Cridland spelled out his concerns in a letter to The Times today. He questioned whether compensation for payment protection insurance (PPI) mis-selling should be paid out where there was 'no real evidence of mis-selling', and suggested that the government put a time limit on claims.
Man of letters: CBI director general said in a letter to the Times that it was time to lay off the banks for PPI mis-selling.
Mr Cridland said 'it is right that consumers are able to get swift and proper redress', but added 'I can’t help thinking that the time has come for it to be put to work more productively through lending into the economy'.
'Banks are hamstrung enough, rebuilding their capital buffers to inject much-needed stability in the banking sector, without this continued millstone around their necks', he said.
The FSA should now rule that most people are aware of PPI mis-selling and set a time limit for claims, Mr Cridland said.
Banks have already set aside more than £12billion to meet the cost of repaying premiums from PPI. All the major lenders increased their provisions last week and the bill is likely to rise even further.
Many claims have been paid with no questions asked because banks need to clear backlogs and do not have sufficient sales records to win cases when they are referred to the Financial Ombudsman Service (FOS), which decides on disputes between individuals and companies.
The volume of claims has been rising as more people are made aware they could have a claim, in particular by claims management companies that conduct claims in exchange for a fee - typically 20 per cent or more of any sum recovered.
Banks have complained that aggressive advertising by these firms has led to many unfounded claims being lodged, sometimes by people that who do not even have a policy.
The FOS said that it upholds more than eight in every ten PPI claims against banks. Banks must pay the FOS £850 for each PPI claim that is investigated, but a FOS spokesman said that no fee was payable in 'frivalous or vexacious' cases - including where the claimant did not own a policy.
The CBI also warned against the rise of class action against banks over products that were reliant on Libor - the interbank lending rate that several banks are now accused of manipulating.
He referred to Guardian Care Home which is suing Barclays for selling it complex interest-rate swap arrangements that it claims were not appropriate. Guardian Care Homes is seeking additional compensation on the basis that the products were linked to Libor, which Barclays was fined for manipulating.
John Cridland said: 'Am I alone in my concern about the recent High Court ruling on the Guardian Care Homes case?
'Banks must be held accountable for manipulation of Libor and the Wheatley Review has set out a comprehensive and compelling case for reform. But hindsight is a wonderful thing. It would be a dangerous precedent if banks were to be held responsible for products sold that related to Libor.
Headlines Newsview all
Amanda Holden at the centre of Twitter backlash as she sends daughter to school dressed as Pretty Woman prostitute for fancy dress day
A parenting group has slammed TV star Amanda Holden for posting a picture of her nine-year-old daughter 'dressed as a prostitute' online.The Britain's Got Talent ... Full story
Grandmother filmed confronting militants and branding them 'devils' before quoting verses in the Koran that forbid slaughter
An incredible video has emerged showing the moment an elderly woman bravely confronted two Islamic State militants, telling them their terror group is cursed and ... Full story
Jobseeker shocked to be sent rudest rejection email ever calling him an 'old, aesthetically challenged professional pr*** with no teeth'
A jobseeker was shocked after he was branded as 'irritating', 'rude' and 'obnoxious' in a cutting email accidentally sent to him by a prospective employer.James ... Full story
Rate this article
MOST POPULAR ON CAPITALBAY
Savannah State University shooting: Georgia campus gets all-clear after person injured in gun attack
An American university placed its campus on lockdown after a shooting that left one person hospitalised. One man was shot and wounded in the student union ...
Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me ‘as naked as possible, but I got the heat because I’m a woman’
Miley Cyrus' duet with Robin Thicke at the 2013 MTV VMAs will go down in history as one of the ceremony's most controversial. The "Wrecking ...
One of the vehicles used by internet giant Google to gather images for its Streetview service has been put out of action after it was ...
1. Chinese stocks are up again. As of this morning the Shanghai Composite Index is up 1.78 per cent. Other Asian markets are on the ...
The bodies of more than 70 refugees have now been found in the back of an abandoned lorry on an Austrian motorway. Forensic investigators have worked ...
Mr Abbott finished his week with indigenous communities with a workoutThe Prime Minister traded his road bike for weights and running shoesHis trip ended in Bamaga ...
Joey Barton joins Burnley: Ex-QPR midfielder signs one-year deal, immediately regrets tweet criticising living the Lancashire town last year
Joey Barton is eating his words after agreeing to join Burnley on a free transfer, a year after criticising the Lancashire town and admitting he ...
Strictly Come Dancing contestants 2015: Full line-up revealed as Kirsty Gallacher and Iwan Thomas join
Strictly Come Dancing contestants will be taking to the dance floor again in September. The celebrity line-up is finally complete, with the likes of Peter Andre, ...
Investigation by news site Gizmodo claims the majority of female profiles were generated by automated 'bots'Data analysis showed of the 20 million men that checked ...
Australia Post has applied to raise the price of their stampsStamps will cost $1 rather than 70 cents under proposal Price change will not affect ...