12May

A sixth UK banking group has announced that the amount it has set aside for payment protection insurance (PPI) has reached the £1.5 billion mark.

Clydesdale Bank plc, which operates the Clydesdale bank and Yorkshire Bank brands, has added a further £450 million to its compensation reserve, taking its total provision to around £1.5 billion.

This total is exceeded only by the ‘big four’ banking groups, where Lloyds Banking Group’s PPI provision stands at £16 billion, Barclays’ reserve at £6 billion, Royal Bank of Scotland’s at £4.3 billion and HSBC’s at £2.63 billion. Santander has also made provision of around £1.5 billion for PPI, meaning that collectively the six banks have now set aside £31.93 billion.
Clydesdale was spun off into an independent entity by parent company National Australia Bank (NAB) earlier this year. However, NAB will still need to contribute £406 million of the additional £450 million.

Clydesdale blamed the Plevin court judgement – which will allow claims to be tabled on the grounds that PPI commission was not disclosed – for the latest increase. The bank has also set aside £600 million for mis-selling claims in areas other than PPI.

In April 2015, the financial regulator the Financial Conduct Authority (FCA) fined Clydesdale £20,768,300 over a number of issues regarding its handling of PPI complaints. The Glasgow-based bank was also required to pay compensation to affected customers as part of the settlement with the regulator.

The issues continued for more than two years, affecting complaints closed by Clydesdale between May 2011 and July 2013. The bank closed some 126,600 cases during this period, and the FCA says that up to a third of these complaints (42,200) may have been unfairly rejected as a result of these failings. A further 50,900 customers may have received insufficient redress.

The issues uncovered by the FCA included:

• Clydesdale had a policy of 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. The FCA did not criticise the policy of destroying certain documents after seven years, but does note that it was not acceptable to have automatically assumed all documents had been destroyed
• Clydesdale submitted false information to the Financial Ombudsman Service (FOS). The FOS began asking for documentary evidence that the bank had searched for documentation in some of the older cases, so Clydesdale started deleting certain information from its systems and producing false screen prints to make it look like the searches had been unsuccessful. The FCA accepted that the practice was undertaken by one team within the bank’s complaint handling operation, and that management were unaware of the issue and had not approved its staff acting in this way
• Training provided to complaint handlers was inadequate, and they were failing to consider all necessary information when considering a complaint. In particular, staff were not giving due consideration to existing sickness benefits provided by customers’ employers

The FCA is expected to confirm later this year that a deadline for making a PPI claim will come into force in 2018.

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.