Lloyds Banking Group has admitted to "issues" with how it handles payment protection insurance (PPI) complaints after an investigation alleged staff were told to ignore possible fraud.

The Times newspaper sent an undercover reporter through the training system at the group's largest PPI complaint handling centre in central London. (See our Reclaim PPI For Free guide for how to claim money back yourself.)

The reporter was allegedly told:

  • Some bank sales staff had faked PPI information in agreements on loan sales.
  • Complaint handlers should effectively turn a blind eye to the risk of fraud, on the assumption that Lloyds' sales staff never mis-sold PPI.
  • The majority of customers would give up pursuing their complaint if the bank rejected it the first time around.

The banking group says it terminated its contract with Deloitte, which operated the centre on its behalf, last month.

'Ignore Lloyds' PPI rejections'

Martin Lewis, MoneySavingExpert.com creator, says: "Initially, the banks' attitude was 'let's get people off our books', and because of this they operated a system to make PPI reclaiming simple and easy.

"But what we've seen over the past six to 12 months, with Lloyds far more than any of the others, is a retrenchment back to 'let's use techniques and complaints handling procedures to deliberately reduce the amount we pay out'.

"Anyone who has had a PPI claim rejected by Lloyds in the past six months should ignore it and put it down to a tactical ploy to put people off.

"It may be that quite legitimately some people don't have a case, so aren't entitled to any money, but equally there will be some that have a very legitimate case.

"Essentially, a rejection is only a rejection if it's from the Ombudsman, and not if it's from the banks – sadly that's just part of the game."

PPI issues 'being addressed'

A spokesman for Lloyds Banking Group says: "Some of the comments made by trainers to the Times reporter are not endorsed by Lloyds Banking Group and we believe they do not reflect our high training standards or our policies.

"We believe the comments to be isolated and they are now being addressed.

"Following the discovery of these issues, and under the guidance of a new supplier, the employees are currently undergoing re-training in line with our policies and procedures."

PPI covers payments on credit cards and loans if the holder loses their job or is unable to work due to an accident or illness.

To date, Lloyds Banking Group has set aside a total of £6.7 billion for PPI redress and paid out more than £4.3 billion to 1.3 million customers.