Lloyds faces fresh PPI accusations
Lloyds Banking Group is facing new claims from the BBC that it cut the compensation it pays to PPI claimants.
An investigation by the latter has suggested the lender has been making legal reductions on payouts to those mis-sold the insurance product.
Update: Lloyds has responded to the claims, saying the numbers provided to the BBC by the claims management companies are "incorrect and deeply misleading".
A Radio 4 programme – Britain's Biggest Banking Scandal – due to be broadcast today, accuses the bank of cutting payments by tens of millions of pounds via a lesser known rule, called “alternative redress”, which is permitted by the Financial Conduct Authority (FCA).
Cliff D’Arcy, a financial journalist, spoke to the BBC on the subject, saying Lloyds has saved more than £60m over the past year. He said: "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."
Alternative redress means the bank’s entitled to deduct the cost of the regular premium policy from the total compensation they would have had to pay otherwise, says the BBC.
Lloyds says that, for an overwhelming majority of claims, full redress has been paid. It's issued the following statement:
Over 98 per cent of upheld PPI claims have been paid with full redress. For less than two per cent of claims, we have used a formula agreed with the FCA to offer comparative redress to customers.
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 the regular premium policy.
In addition the numbers for overturn rates are again misleading. The overturn rate for loans claims is the same whether it is for comparative redress or for other reasons.