An estimated 12 million people will soon be getting letters informing them they may be due compensation for mis-sold payment protection insurance. Banks fear the campaign could double the amount of money they expect to pay out.
Under orders from the Financial Services Authority, the banks must now send clearly-written letters to any customers who may have been mis-sold PPI, even if they haven't yet complained.
The FSA estimates that as many as 90% of those receiving the letters will be eligible for compensation, but warns that in previous similar mailouts just 10% of recipients took any notice of the letters.
The banking industry, however, doesn't believe it will get away so lightly. Leaked calculations suggest banks are preparing for 60% of recipients to successfully apply for compensation. Based on average claims, that could mean a total payout of £14 billion, which swamps the £8.6 billion that's already been set aside to cover the compensation -- an accounting measure that contributed to the recently announced heavy losses of the RBS group.
Banks that have already written to customers won't have to write to the same people again unless the FSA rules the original letter was unclear or misleading.