In April 2011 a collection of UK banks lost a judicial review into the PPI scandal meaning they would now be forced to compensate any customer who was mis-sold PPI, a decision that the BBA (British Bankers’ Association) decided not to appeal.
Lloyds TSB were encouraged as the UK’s largest bank to contact those customers who were victims of the mis-selling even if they had not claimed on the insurance.
Natalie Ceeney, from the FOS said: “This judgment is very clear-cut – and it confirms that the ombudsman’s approach to PPI complaints is right.
“People have been waiting a long time while the banks’ legal action has been ongoing. I would now like to see financial businesses showing real commitment to sorting out their customers’ complaints efficiently and promptly.”
Initial estimates indicated that this could cost Lloyds over £4bn, since then a war chest of compensation has been set aside £3.6bn by the bank in attempt to separate their business finance from the scandal. The FSA have estimated that 1.5 million claims have already been made (late 2011) and there an additional 15 million policies in the UK that were mis-sold and due compensation.
In 2012 Lloyds, along with several other main stream banks have been contacting customers who have PPI attached to a personal finance product urging them to claim directly through the bank. This has caused controversy in the PPI claims market, as Claims Management Companies offering the specialist service feel they are being victimised because of the banks’ inherent authority.
Claims Management Companies claim that in any other industry there are service providers who profit from marketing a product or a service that offers a customer some added value, with their key advantage being acting on behalf of the client and utilising their knowledge & resource to get compensation successfully.
In recent years more than 200,000 cases have been processed by the Financial Ombudsmen Service, these cases have been initially rejected by the banks and sent to the FOS as a third part investigator of the case.
In the case of many Lloyds customers cases the mis-sold PPI totalled around 25% of the total loan premium, in one published case this amounted to £25,000 in additional premiums on a £60,000 loan.
Customers of Lloyds TSB have claimed that the majority of policies were mis-sold because of lack of information which led to them being unable to make a claim on the policy if needed. With a large proportion of customers claiming to have been pressurised or convinced into having the product which they were not completely sure of its purpose.
In 2012 Lloyds TSB announced that their PPI compensation provision was approaching the £4bn mark as a sharp rise in claims meant extra capital and resource was needed to service the back-log and ever increasing new complaints.