Investigation Reveals Lloyds Salesmen Faked PPI Information

june-11-01An investigation by The Times has revealed that several Lloyds loan salesmen faked PPI information in loan agreements with the bank’s customers. The scandal was revealed during a training program designed to assist customer service agents for the bank in completing the ‘morally difficult’ task of dealing with PPI claims.

Numerous Lloyds loan salespeople are alleged to have misleadingly filled in blank boxes on loan application forms, leading to customers buying Payment Protection Insurance from the financial services company. The fraud is believed to apply to a wide range of borrower accounts, many of whom complained about PPI.

Investigators allege that salespeople took loan agreements signed by customers of the bank, and modified them to indicate their interest in PPI services. The contracts featured blank boxes offering borrowers the ability to purchase PPI, which staff are alleged to have filled in after borrowers submitted the completed application form.

The bank’s support staff allegedly knew of the misleading tactics, and are alleged to have been encouraged to turn down PPI claims from the applicants. Staff were told to reject PPI claims at the bank’s contracted Deloitte call centre, as well as delaying applications for Payment Protection Insurance claims to dissuade customers.

While the Lloyds PPI scandal certainly isn’t the first major sales ethics scandal to put retail banking in the spotlight, it’s one of the first to indicate widespread misleading tactics aimed at consumers. Lloyds is now encouraging its PPI claimants to resubmit their claims to new call centres, as well as retraining many of its salespeople.

Lloyds was fined £4.3 million in February for deliberately delaying PPI settlements, and has continued to be monitored by the Financial Conduct Authority. The bank, as well as three other major high street banks, has set aside a multi-billion pound PPI compensation budget for consumers affected by the misleading sales policy.

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Banks incur more than £550m in losses due to mis-sold PPI claims

According to the Financial Ombudsman Service (FOS) approximately 90% of mis-sold payment protection insurance (PPI) claims are being honored, with claimants receiving compensation payments worth anywhere from hundreds to thousands of pounds. With the startling number of PPI claims being filed against high street banks, the total amount of PPI compensation financial institutions have paid out during the first six months of 2011 has reached an astonishing £557m.

Although PPI compensation payouts can range anywhere from a few hundred to tens of thousands of pounds, the average compensation payment ranges anywhere from £2700 to £3000. Since 9 of every 10 people that file for mis-sold PPI compensation have their claims honored, every 10 people that file a PPI claim caused banks to pay out approximately £25,000 to £50,000. More than 532,000 people filed PPI complaints during the first half of the 2011 fiscal year.

Payment protection insurance is supposed to provide protection for borrowers in the event that they are unable to make repayments toward their mortgage, credit card, or other type of loan. However, many lenders and financial institutions have been mis-selling PPI policies by offering them to individuals that are not actually eligible for coverage. As a result, many borrowers are filing complaints and receiving refunds for all of funds spent on the mis-sold PPI policy.

In May the Financial Services Authority (FSA) urged high street banks to expeditiously proceed with paying out compensation payments, stating that the banks had to meet a deadline of processing all 200,000 backlog claims before the end of August. The total amount of compensation paid out during August alone reached £230m.

According to FSA guidelines, banks have eight weeks to process a PPI complaint. However, this does not mean compensation payment must be issued within that timeframe, but that a decision regarding the complaint must be made before the end of the a week. Most consumers have chosen to file their complaints through a claims management company or professional PPI solicitor, and most complaints are brought before the Financial Ombudsman Service by these representatives on behalf of the complainant.

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Barclays Number One on FSA’s Bank Complaints List

With the Financial Services Authority (FSA) receiving complaints against high street banks at an all-time high, Barclays Bank tops the list at an astonishing 250,000 new disputes being recorded during the first half of 2011 alone.

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Financial Ombudsman Service Overwhelmed with Complaints

At one time the Financial Ombudsman Service was where consumers were taking complaints when they needed a quick decision in a dispute with a UK firm. Now however they are turning to the media because the FOS is so overwhelmed with a backlog of cases that it is often taking as long as 2 years for each case to be reviewed and resolved.

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HSBC Unlikely to Meet PPI Deadline

HSBC was just one of the high street banks which were found to have mis sold PPI and one of those also ordered to clear its backlog of complaints. As that deadline is near, word has leaked that the bank has failed to do so and may be in for some legal repercussions from the Financial Services Authority (FSA).

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