Barclays is facing a £1.6bn legal bill from an American credit card firm over the mis-selling of a product similar to Payment Protection Insurance (PPI).
CCUK Finance has filed the lawsuit following the purchase of half a million credit agreements from the bank in 2007.
These plans were later deemed ‘worthless’ partly due to Payment Break Plans (PBPs), which operate in the same way as PPI.
According to the filing from the American company these PBPs were ‘systematically mis-sold’ by Barclays to customers who were ‘wholly unsuited’ for the product.
Barclays said the allegations were ‘baseless and without merit’, saying it will contest the charge during the proceedings.
Only Lloyds has set aside more in compensation for mis-sold PPI than Barclays, with the bill for the latter now standing at £8.5bn.
According to data from the Financial Conduct Authority (FCA) more than 150,000 complaints against Barclays in the ‘Insurance & pure protection’ category were resolved between July and December last year, with 86% upheld in favour of the consumer.
It is estimated that over the past 10-15 years £50bn worth of PPI policies were sold in total in the UK and FCA figures show almost half that amount still remains unclaimed.
As many as 30m consumers with up to 64m policies may have fallen victim to the mis-selling scandal according to FCA estimates.
In an attempt to bring an end to the saga the industry watchdog confirmed a deadline on all new PPI claims for August 2019, despite concerns from some commentators that many people would miss out due to the cut-off date.