Lloyds Banking Group has said "sorry" for flogging worthless payment protection insurance (PPI) policies and promised a catalogue of measures to provide compensation for victims, in yet another sign of capitulation by banks.
The UK's largest PPI seller – with an estimated 40% market share – admits in an interview with MoneySavingExpert.com some of its sales processes were flawed and concedes it didn't always treat complainants fairly in the past.
- Lloyds 'sorry' for mis-selling
- Bank will recruit 500 staff to handle complaints
- It will listen to re-started complaints that were previously rejected
- But it won't do a Barclays and auto refund claims from those on hold
The apology adds to the huge turnaround in language from Lloyds and the rest of the banking industry. Lloyds has already set aside £3.2bn to pay claims on PPI – to cover loan or credit card payments if you cannot work.
Lloyds is drafting in 500 staff to deal with the huge backlog of cases and has promised to re-open complaints from those who've previously had a rejected claim who try again.
Barclays said yesterday it will refund anyone, with no questions asked, whose claim was put on hold on or before 20 April, though Lloyds – which includes Lloyds TSB, Halifax, Bank of Scotland and Black Horse – will not do the same.
Barclays, Lloyds and most other banks sat on claims pending the result of a failed judicial review where banks unsuccessfully tried to overturn Financial Services Authority rules that force them to contact those mis-sold as a result of systemic problems, even if that person has yet to claim themselves.
Lloyds PPI director Ian Hallett, appointed in the newly-created role in March, agreed to answer your concerns on PPI mis-selling and the reclaiming process (in bold font). Here are his responses (in normal font).
Do you accept Lloyds mis-sold PPI and what is your message to victims?
We acknowledge there are cases where we could have been clearer in sales processes and as a result we didn't meet standards we set. For that we are extremely sorry if people have a cause for complaint.
Why did this happen?
As with many financial products, there are a lot of factors involved that contribute to how a sale is completed, such as the design of the product, the sales processes and regulatory requirements.
When looking at cases we tend to see reasons that are specific to the actual sale for why our high standards may not have been met.
What will you do to pro-actively contact customers, who may not have claimed themselves, who were mis-sold as a result of systemic problems?
We have already started contacting customers where we have identified common trends.
We are always analysing trends and coupled with information from discussions with the Financial Ombudsman Service we may identify more areas. Our primary method of communication will be letter. More complaints from consumers help us understand trends of systemic mis-selling.
When will the letters be sent?
It is an ongoing process which started for some at the beginning of the year, even before the judicial review (see the Halifax credit card PPI refunds MSE News story). There is no end date as we will send letters as and when we identify trends.
Will you pro-actively contact people mis-sold where the problem was not systemic, say where the adviser made an error or deliberately mis-sold?
We will only contact customers where there may have been a systemic problem.
What happens to those who've had a rejected complaint in the past? Will you contact them again? Or will you re-open the case if they contact you?
If a customer is in that situation with new concerns we would encourage them to get in contact with us.
Every form of complaint we treat seriously and along the same process even if they were rejected previously.
We need to remember, as I said earlier, that if we identify a systemic issue, those who have complained in the past [who were rejected] may be in the group that gets a letter.
What happens to people whose cases were put on hold given Lloyds, along with most banks, sat on claims pending the result of the judicial review?
If any customers that have a complaint are awaiting a response there is no need for them to do anything. We will get them a response by the end of August if they complained by 6 May.
For customers who have submitted a complaint on or after 6 May, we will provide a full response within 16 weeks of receiving the complaint [these are as a result of new FSA rules on cases on hold. Usually, banks have eight weeks]. We have recruited 500 people to help get that done quickly.
Will you follow Barclays's lead in automatically refunding those whose claims were on hold?
No. However, we are handling all PPI complaints fairly and consistently regardless of when they were received. We will ensure we provide a clear response to every customer that has submitted a complaint to us.
What about people who were given a partial refund in the past? Say they had paid £2,000 for PPI but you only refunded £1,000. Will you contact them to give them the rest back? What if they come asking for the rest back?
We won't contact them ourselves. We review complaints on an individual basis. If someone has a new concern they should contact us. It is hard to say if they'll be successful or not as it'll be assessed on a case-by-case basis.
Will you offer any damages on top of the premiums back and the interest charged on them?
We are required to consider this. The amount of compensation people are entitled to is different and takes into consideration all the factors at play so I cannot say how much we would award.
Will you set up a fast-track reclaiming system? If so, what?
No, we have no plans to. However, we want to give our customers guidance as to how they can help speed the process up. It is as follows: when they submit a complaint, use the Ombudsman questionnaire from the Ombudsman website and fill it out when they complain to us as it has so much of what we need.
If they can find documentation from when the sale was made then send it along. They can also write a separate letter if they wish but having as much information as possible will help us not have to write back to ask more questions, which takes time.
We need to have a specific understanding of the sale and need as much information as possible. We normally have eight weeks to resolve complaints but it can be quicker if they follow the guidance.
Can you promise you'll look at cases fairly and avoid the fact the Ombudsman upholds up to 90% of some Lloyds customers' complaints, mainly with Black Horse, which shows they were wrongly rejected to start with?
I can promise all areas of the business will be fair. It is not in our interest to have the situation you refer to. We want to ensure that will not happen again.
The standards we have are common throughout the business. We have a single PPI complaints handling process and it is monitored centrally with me in charge. These came in since the judicial review results.
Do you advocate the use of claims management firms to make a complaint?
I concur with what the Ombudsman says that the quality of complaint we receive doesn't vary, whether people use a claims handler or do it themselves.
Even if they use a third party we may still need to talk to them or write to them.
Will you simplify your letters to customers as we're told they're overly complicated?
Some letters were over-complicated. We are changing letters imminently but some of the old style letters have already gone out.
Some customers have expressed concern that if they claim on PPI you may penalise them elsewhere, say by removing or reducing an overdraft. Is this true?
No. There is no relationship between PPI complaints and any other service from the bank, so this would not happen.
Why did Lloyds initially try to fight the FSA as part of the British Bankers' Association judicial review before it announced whether or not it would appeal [which it eventually chose not to do] given you have now admitted liability?
The banking industry, including Lloyds Banking Group, shared concerns about some aspects of the regulation which created the legal process.
In April, there was a very clear judgement, and coupled with conversations with the Ombudsman, it gave us the clarity we needed which is why we said we'd no longer take part.
MoneySavingExpert.com creator Martin Lewis says: "It's good to hear the word 'sorry', even if couched in banking speak. These policies were deliberately mis-sold to boost profitability and though it's taken years of pushing, kicking and courts, finally justice is being done.
"Lloyds, sadly, hasn't gone as far as Barclays, no doubt as its mis-selling exposure is so much bigger, so it is still cheaper for it to process and delineate between valid and invalid claims rather than just payout.
"Yet it does look like Lloyds now defaults to a position of sorting cases out rather than its old stance of deny, deny, deny and push people to the Ombudsman. That's a big move especially with its willingness to re-look at past rejections.
"However, even with the new proactivity, it doesn't mean people should sit on their laurels, just because the bank will contact some who've been mis-sold. Many more still need to get in touch themselves.
"So you must assume you won't be contacted and continue to do a DIY complaint now."