17Aug

National Australia Bank has announced that it may need to set aside up to £500 million more to pay mis-selling claims at its UK subsidiary, Clydesdale Bank plc. Up to an additional £420 million may need to be set aside for payment protection insurance (PPI) claims, and up to £80 million more for mis-selling of interest rate hedging products (IRHPs).

The parent company says there are a “wide range of uncertain factors relevant to determining the total costs associated with conduct-related matters.”

Both the Clydesdale Bank and Yorkshire Bank brands are operated by the listed entity, Clydesdale Bank plc. Back in October 2014, the bank’s PPI compensation reserve was increased by £420 million and the IRHP provision by £250 million.

In total, the bank has set aside £806 million for PPI mis-selling to date, so the worst case scenario, based on the latest announcement, would take their total PPI reserve to more than £1.2 billion.

In April 2015, financial regulator the Financial Conduct Authority (FCA), fined Clydesdale Bank £20,768,300 for failings in its handling of PPI complaints. The FCA criticised the bank for:

• Not conducting any searches for relevant documentation where the associated loan or mortgage had been repaid more than seven years prior to the PPI complaint, even though it was aware that documentation may still be available
• Submitting false information to the Financial Ombudsman Service (FOS) regarding the documentation it supplied regarding these searches
• Failing to provide adequate training to complaint handlers – many employees were unaware of all the issues to consider when reviewing a PPI complaint

PPI has been mis-sold on a massive scale over a number of years. Large numbers of complaints are still being made by consumers who allege that the insurance was unsuitable, that they were incorrectly informed it was compulsory or that the insurance was added to their loan without their knowledge or consent. The FOS is also reporting increasing numbers of complaints from consumers who believe that their provider has offered insufficient compensation.

An FCA statement on PPI is expected to be made later in summer 2015. This is expected to include details of the latest findings regarding how firms are handling complaints, as well as giving the FCA’s reaction to a recent court ruling, which could lead to a new wave of PPI complaints being brought on the basis that the commission was not disclosed. According to press speculation, the statement also may or may not give details of a time limit on when a PPI complaint can be made.

IRHPs are designed to protect against rises in interest rates on business loans, however interest rates have been at a historic low for many years, meaning that the products have been of little value recently. Many businesses have been hit with significant fees and exit costs as a result, and many have said that they have experienced significant financial problems or even gone bust as a result.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.