“We were on the side of the angels,” said Eric Daniels as he defended the Lloyds Banking Group against charges of mis-selling payment protection insurance (PPI) to UK consumers. Daniels, who acted as the head of Lloyds until February 2011, sat before the MPs at the Parliamentary Banking Commission and argued his case that the majority of policies had been sold correctly.


Banks defending PPI Policies

Daniels contended that the current quagmire, which has cost the bank £5.3bn in provisions, is the result of a “difference in understanding” between the Financial Services Authority (FSA) and the bankers. He pointed the finger of blame at FSA that changed the required sales rules for policies. These policies are designed to make loan repayments in the event of a job loss or illness by a customer who bought the policy.

Hmmm, you could have at least told the customers you were attaching the policy to their account

One of the FSA rule changes required evidence of verbal exchanges between banking staff and customers in addition to written documentation. A clearly flabbergasted Daniels said that written documentation was always in plain English and could be understood.

Daniels, though, was not beneath taking a share of the blame, stating that he was “deeply regretful” for mis-sold PPI policies. He further humbled himself before the commission when he said that “We were responsible” for not complying with FSA rules.

Daniels defended the PPI scheme and said that these policies were not highly profitable for the banks. Lord John McFall countered that these policies had an 87 percent commission rate. Daniels insisted that the profitability of these financial instruments was well below that of other financial products that the banks sell.

The hearing also revealed that Antonio Horta-Osorio, who succeeded Daniels, took back a £580,000 bonus paid to Daniels in 2010. He also blocked a £1.2m bonus that Daniels received for the ill-fated rescue operation that integrated Lloyds with HBOS and cost taxpayers 20 billion pounds.

The commission chair, conservative MP Andrew Tyrie, asked Daniels how many policies had been mis-sold. Daniels quipped that the number was about 200 percent, judging by the number of claims paid out. It’s believed that a good number of false claims were paid out by the banks because the bankers couldn’t handle all the claims in the timeline set by FSA.

“A fair number of bogus claims were paid out because the number of claims were so overwhelming that banks could not analyse whether or not they were genuine or not,” Daniels told the committee.

Overwhelming ? 6,000 reported in 2012 VS  156K  legitimate and uphelp claims

Financial analysts are estimating that UK banks will face a final bill of more than 12 billion pounds to settle all the claims. It’s expected that the number of  PPI claims will double before the dust settles. Daniels told the MPs that more than half the claims are bogus.

The most recent data shows that 6,000 people filed bogus PPI claims in the past financial year, according to the Financial Ombudsman. There were 157,761 gripes against PPI, which was a 51 percent increase above 2010-2011.

Critics have accused claims management companies of gaming the system to wring PPI payouts from banks. In the past financial year, claims companies have initiated 69 percent of all PPI claims referred to the ombudsman. This is down from 76 percent in the previous financial year.

There had been a four-fold increase in bogus claims to 5,661 in 2011, most of which were generated by claims companies. Sheffield, Birmingham and Belfast lead the way in bogus applications.

With a huge treasure chest of pounds about to be paid out in the PPI scheme, the effort naturally attracts people of a less sterling character. “At the same time we are seeing consumers being very badly misled by claims management companies,” said Chief Financial Ombudsman Natalie Ceeney.

It’s been revealed that claims companies are sending out emails and calling millions of people, encouraging them to file PPI claims. The claims companies will charge people 25 percent for their services. Some even ask for an upfront fee, and consumers end up losing their money.

Lloyds complained that it has been buried in claims, necessitating hiring 6,000 extra staff. Horta-Osorio at Lloyds claimed that one in four claims are from people who never had a PPI policy at the bank.

In the end, this fiasco proves that sometimes the devil sneaks in amongst the angels.



Maple Leaf Financial PPi Claims Service


Many claims management companies offering you a refund don’t fully understand this area of law either. These companies simply complete the paperwork on your behalf and send it into the lender. Once the lender rejects the claim they have nothing else to offer you but sending the claim to (FOS) Financial Ombudsman Service- where the claim will join another very long queue. We have known people wait 6 years for a result.

Very few of our claims are sent to FOS- we would rather run them correctly in the first place. We have sent less than 50 claims to FOS in Five years – what does that tell you? Quality workmanship.

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.