Chart of The Day: PPI victims paid £2 billion but owed billions more

The banks paid out £1.9 billion in compensation to payment protection insurance (PPI) mis-selling victims last year, according to the regulator’s latest figures.

Most of this compensation was paid out towards the end of the year. Some £444 million was paid out in December – the largest monthly pay-out so far – following a total of £379 million in November and £268 million in October, the Financial Services Authority said.

PPI cumulative compensation paid in 2011

Source: FSA

However, while a substantial amount, this is still a long way off the £6 billion the banks are expected to pay out.

Lloyds Banking Group (LLOY.L) alone has put aside a huge £3.2 billion to cover the cost of PPI compensation. Barclays (BARC.L), meanwhile, has ringfenced £1 billion, Royal Bank of Scotland (RBS.L) £850 million, Santander £731 million and HSBC (HSBA.L) £310 million.

PPI is supposed to cover your loan repayments in the event you can't work, but lenders have come under fire in recent years after it emerged they had sold the policy to millions of people who did not need it or could never make a claim.

If you suspect you have been mis-sold a PPI policy your first step should be to contact your bank – avoid expensive claims management firms which promise to get you a quicker result because there is nothing they can do you can't do for free.

For more information check out our guide: PPI mis-selling: how to get your money back.