Lloyds accused of shortchanging PPI claimants
Lloyds Banking Group has been cutting the compensation it pays to Payment Protection Insurance (PPI) claimants to save £60 million, the BBC has claimed.
Banks have set aside billions of pounds to deal with the PPI scandal, which saw thousands of consumers mis-sold the insurance alongside mortgages, credit cards, loans, store cards or other credit agreements.
But a BBC investigation claims some consumers who bought a single premium PPI policy they paid for upfront at the start of their policy and then successfully claimed they had been mis-sold have not been adequately refunded.
This, it alleged, was because the bank has been deducting the cost of a cheaper, regular premium policy from the compensation package on the premise the customer could have bought one of them instead.
Banks are technically allowed to use this "alternative redress" rule, according to the Financial Conduct Authority's (FCA).
A scandal in a scandal
However, Cliff D'Arcy, who used to work at Lloyds subsidiary HBOS's PPI operation, told the BBC Lloyds had saved more than £60 million over the past year by using the method.
"What's happening here is a taxpayer-sponsored bank is depriving taxpayers of their rightful compensation by using a loophole," he said.
"It's a scandal coming out of a scandal."
The Financial Ombudsman said that while complaints about alternative redress were still only small, it had had seen an increase in the number.
A spokesman added: "If people do feel that they have not got the correct payout from their bank, they should contact the ombudsman, who can sort it out."
Lloyds told the BBC that 11% of its offers made in the fourth quarter of 2013 were made by using alternative redress.
A spokeswoman for the group said the figures represented only a tiny fraction of the claims they have dealt with.
"The numbers that have been provided to the BBC by the claims management companies, are incorrect and deeply misleading," she said.
"Over 98% of upheld PPI claims have been paid with full redress. For less than 2% of claims, we have used a formula agreed with the FCA to offer comparative redress to customers.
"The FCA handbook is very clear that in these specific circumstances, the provider should give redress that puts the customer in the position they would have been in had the customer taken the regular premium policy."
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Claims management companies
Regulated by the Claims Management Services Regulator since 2006, claims management companies offer advice and legal services in respect of claims for compensation, restitution, repayment for loss, damage or negligence. To many, the term is merely a polite euphemism for “no win, no fee” law companies. If you feel they offer services you need, approach with care.