07Aug

Late July 2015 saw some of the UK’s largest banks announce additional provision for previous mis-selling, as they revealed their profit figures for the first half of the year.
Lloyds Banking Group, which includes Halifax and Bank of Scotland, has set aside an additional £1.4 billion for payment protection insurance (PPI), taking the total to £13.4 billion. Several years after large scale mis-selling of PPI ended, Lloyds is clearly still expecting to have to settle a large number of claims. The announcement comes only weeks after Lloyds was fined £117 million by the Financial Conduct Authority for failing to handle PPI complaints correctly.

This amount may still have to be increased by up to £3 billion according to the bank. It has paid £11.2 billion in compensation so far.

Lloyds has also allocated £175 million to pay compensation for mis-sold packaged bank accounts (PBAs).

Lloyds chief executive Antonio Horta-Osorio said:

“The additional provision for PPI is disappointing and mostly reflects higher than expected reactive complaints with higher associated redress.”

While Lloyds’ additional provision did not prevent it declaring a £1.2 billion pre-tax profit for the six month period, up 38% on the equivalent period in 2014, Royal Bank of Scotland declared a loss of £153 million for the same period. It anticipates paying £157 million in respect of PBAs, and its PPI compensation reserve currently stands at £3.8 billion.

Barclays set aside an additional £750 million for PPI (taking its total to £6 billion) and also set aside a specific sum (£250 million) for PBA compensation, but still declared a profit of £3.1 billion.

The Financial Ombudsman Service (FOS) is still finding in the customer’s favour in 74% of the complaints it adjudicates, based on its figures for the period April to June 2015. It received 49,377 PPI complaints and 12,119 PBA complaints during the quarter, out of an overall total of 89,935.

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.

In some ways, the reasons why a PBA complaint may succeed are eerily similar to the reasons why PPI was mis-sold. PBAs involve a customer paying a monthly fee with their current account, and receiving a number of insurances and other benefits in return. Many customers allege they were ‘upgraded’ to a packaged account without their knowledge or consent, or were told there was no other account option available, or that the bank never checked whether they were eligible to claim on the insurances and whether they would benefit from having them.

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.