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News

Lloyds Banking Group 'using loophole to cut PPI compensation payouts'

Banks and building societies have set aside billions of pounds to reimburse consumers who were mis-sold PPI policies alongside loans and credit cards, with Lloyds alone providing almost £10bn for payouts. However, the BBC said some customers who had bought single-premium PPI policies, where the entire cost of the insurance was charged upfront and added to the loan, were not getting all of their money back.

Instead, it said, the bank was deducting the cost of a cheaper, regular premium policy from the payout, on the basis that the customer would have bought one of them instead. This is allowed under “alternative redress” rules outlined by the Financial Conduct Authority (FCA), as long as the customer would have been able to make a claim.

The radio programme, Britain’s Biggest Banking Scandal, cites the case of Veronica Rayner, a care worker who had two loans from Halifax, now part of Lloyds Banking Group, and was offered £2,300 by the bank. When Rayner’s case was taken to the Financial Ombudsman Service, Lloyds was told to pay her an additional £1,200.

At some points in 2013, a quarter of cases against the bank were being settled in this way, according to the Professional Financial Claims Association, a trade body representing claims management companies.

Cliff D’Arcy, a journalist who used to work in financial services, told the BBC: “What’s happening here is a taxpayer-sponsored bank is depriving taxpayers of their rightful compensation by using a loophole. It’s a scandal coming out of a scandal.”

The Financial Ombudsman said that while complaints about alternative redress were still only a small percentage of the hundreds of thousands regarding PPI, it was seeing a growing number of them. 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.”

PPI policies were riddled with exclusions, and many of those who bought them expecting a payout if they were unable to work found they were not eligible to make a claim.

A Lloyds spokesperson said: “There are a small number of loan customers who were eligible and suitable for PPI and who bought a single premium PPI policy. In some cases if the option had been available to these customers at the time, they would have bought a regular premium policy instead of the single premium policy.

“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 a regular premium policy.

“We have confirmed to the BBC that the percentage of these specific loans PPI complaints assessed in Q4 [the fourth quarter of] 2013 and which was given comparative redress is 11%.”

Article taken from – The Guardian

If your not sure that you have the right compensation, call our experts at Creditline Financial who will guide you through the process.

Posted by Jay Beecher on 25 Mar 2014

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