01Nov

The publication of the third quarter financial results of the UK’s major banks has seen two of the largest banking groups increase their payment protection insurance (PPI) compensation reserve once again.

Lloyds Banking Group increased the amount it has set aside for PPI mis-selling compensation by £1 billion to £17 billion. It also allocated another £100 million to settle claims relating to mis-sold packaged bank accounts and another £50 million for other conduct issues.

Lloyds, which is still 9% owned by the Government, also suggested it would not acquire the MBNA credit card business from Bank of America if the deal meant having to take on additional PPI liabilities. MBNA has been responsible for more PPI complaints than some of the high-street banks.

The additional sums set aside contributed to Lloyds experiencing a 15% drop in pre-tax profits – they fell to £811 million for the three months to September 30.

Barclays Bank meanwhile announced it had allocated a further £600 million to its PPI compensation reserve, taking the total to £8.4 billion. Barclays however reported third quarter profits had risen 35% to £837 million.

Both Lloyds and Barclays expressed the hope that this will be the last provision they need to make for PPI, with a deadline for making a PPI complaint expected to come into force on June 30 2019.

“It would be the last big PPI provision that we would expect to take,” said George Culmer, Lloyds’s finance director.

“We feel that should be enough but we’ll continue to monitor trends,” said Tushar Morzaria, his counterpart at Barclays.

Royal Bank of Scotland did not make any additional provision for PPI in the third quarter.

According to think tank New City Agenda, these announcements have taken the industry’s total PPI compensation bill past the £40 billion mark – this really has been mis-selling on an industrial scale.

The regulator, the Financial Conduct Authority (FCA), is still conducting a consultation on imposing a PPI complaints deadline in June 2019. However, while it seems almost certain that the proposals will be adopted, until that time it is very much still possible for a consumer to make a PPI complaint to a bank or other firm that sold the insurance, and to refer the matter to the Financial Ombudsman Service if dissatisfied with the firm’s decision.

Common grounds for PPI complaints include:

• PPI policies not covering the full loan term
• Firms failing to take into account existing insurance and sickness benefits when assessing suitability of the cover
• Firms not notifying customers of key policy exclusions, such as pre-existing medical conditions
• Customers being told PPI was compulsory, or that it would improve their chances of being accepted for the loan
• Customers being sold PPI without their knowledge or consent
• PPI being sold to self-employed customers who were ineligible to claim under the unemployment section of the policy

From next year, it should also be possible to table a PPI complaint on the grounds that the firm did not disclose a commission payment that amounted to at least 50% of the premium.

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.