Lloyds increases PPI payout pot by £2.1 billion
The PPI (payment protection insurance) mis-selling scandal shows no sign of abating, with Lloyds Banking Group today announcing it put an extra £2.1 billion aside in the last quarter of 2015 to settle PPI claims, plus a further £837 million for other mis-selling claims.
The partially-state-owned bank, which includes Lloyds, Halifax and Bank of Scotland, put aside a total of £4 billion to pay PPI claims in 2015, including the extra money announced today.
Overall, the bank has now allocated a whopping £16 billion for PPI claims. That’s equivalent to over £200 for every man, woman and child in the UK.
Figures published by complaints arbitrator, the Financial Ombudsman Service (FOS), earlier this week show the partially state-owned bank received 15,550 PPI claims in the second half of 2015. The Ombudsman ruled in favour of the customer in 91% of resolved cases.
As a result of mis-selling provisions, the bank’s statutory profit fell by £200 million to £1.6 billion.
Lloyds Banking Group chief executive, Antonio Horta-Osório, says: "We remain confident in our ability to become the best bank for customers and shareholders, while continuing to support the economy and helping Britain prosper.”
If you’ve been mis-sold PPI, complain
Of the PPI claims submitted to Lloyds, 70% were made by claims management firm, and only yesterday, the National Audit Office estimated almost a quarter of PPI payouts ended up in the hands of claims handlers, worth somewhere between £3.8 billion and £5.5 billion.
But if you think you’ve been mis-sold PPI by Lloyds or any other bank, complain to the bank yourself, don’t use a claims management company that will take around 25% of your winnings. See our guide to reclaiming PPI premiums, which includes a free template letter.
If that doesn’t work, take your gripe to the free Financial Ombudsman Service.
Rising packaged account complaints
Lloyds has also put aside a further £837 million to cover compensation for other customer issues, including packaged bank account mis-selling, which have been rising across the industry.
As with PPI, if you think you’ve been sold an inappropriate packaged account, you don’t need to pay someone to sort it out for you. Complain to your bank in writing in the first instance, and if that doesn’t work, you can contact the Financial Ombudsman Service.
Good news for shareholders
Despite these huge costs to the company, Lloyds’ share price soared 11.8% to 69.8p around midday, today boosted by rising underlying profits and an expected dividend boost.
The board recommended a final dividend of 1.5p per share, taking the total for the year to 2.25p per share, plus a special dividend of 0.5p per share.
In light of today’s stock market movements, Lloyds Banking Group’s share price was trading 3.9% below 72.6p, which is thought to be the government’s target price before it sells its remaining shares.
The remaining shares are expected to be sold to the public at a discount – if you’re interested, see our latest update.
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
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.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.