Banking Industry Surrenders Over PPI Mis-Selling Fight

Many in Britain have been shocked to discover the recent news that the big banks in the United Kingdom have finally decided to abandon their battle to challenge the new rules against the mis-selling of PPI, payment protection insurance. Some experts had wondered if the British Bankers’ Association would continue to appeal once they lost their court case, but it appears that this is not to be.

This is good news for consumers who have been mis-sold PPI in a big way. Already, Lloyds Banking Group has created a provision for over £3 billion in potential claims and they are not the only banks gearing up for claims, by any means. HSBC is prepared for nearly £270 million, Barclays is ready for £1 billion and RBS paid out or had prepared for £200 million, but is moving that figure up to almost £1.5 billion in new claims they want to be ready to compensate for.

Economic experts say it is about time that British banks come to their senses after more than 10 years of not just mis-selling PPI, but mishandling the complaints from consumers, too. Consumers felt duped, as if they were tricked by an industry they can not trust – something that is a big problem for Britain where the economy still has a long way to go before it will be fully recovered.

Many in the UK right now may not realize that they can make a claim if they have been tricked into buying PPI. In fact, as things stand currently, millions of people are going to be able to get compensation payments. Quite a few people who had complained had their payments put on hold, but those will now be able to be processed since the court appeal has come to an end.

For those who do not know, the purpose of PPI was to help people cover repayments on loans if they were to fall ill, experience the loss of their job or experience an accident. The issue is that PPI was sold to people who would not even be eligible to make a claim on it if they ever found themselves in need. This means that those who are self-employed, for example, would be told that they must purchase the PPI if they wanted to be approved for their loan. In extreme cases, there were even those who were entirely unaware that they had taken out any sort of policy at all.

Now, new rules from the Financial Services Authority are what the banks will have to adhere to. The High Court said that banks now must go back over all of the sales of PPI that they have made in the past and find out if their customers have the right to claim for mis-sold PPI.

Banks in UK Bracing for PPI Claims Totalling Up to £5 Billion

Things are looking bad for UK banks as they are staring down the barrel of £5.1 billion over the course of the next 5 years for the purposeful misselling of PPI (Payment Protection Insurance) to consumers who now are legally entitled to be compensated for the misselling. In turn, consumer help services like 1ppi.co.uk have taken up the cause to help consumers and are finding tremendous success processing these claims. Banks are not happy, but the Government has made it clear that they must pay for their mishandling of the trust consumers have placed in them. Without that trust, say economic experts, Britain’s economy will have trouble fully recovering as consumers grow wary of dealing with the banking system. The compensations serve as a way for these banks to re-establish that trust with their customer base.

Credit card holders are the primary victims of this missold PPI and many were crunched financially during already rough economic times. Major British banks like HSBC, Barclays and Lloyds Banking Group are looking at paying out millions of pounds in compensation as the scandal over PPI gains more and more public exposure. Morgan Stanley, a US investment bank, released research which shows that Lloyds alone, the bank believed to be most heavily involved in the PPI misselling, is going to face up to £1.5 billion in PPI claims. Credit Suisse recently said via its analysts that it could be paying a solid £1 billion due to PPI misselling.

The Financial Services Authority of the UK had said in August 2010 that the industry would be facing up to £3 billion in claims over PPI, but Morgan Stanley has said that it based its estimated on a success rate of 46% for compensation claims because people now know of services like 1ppi.co.uk having such strong success at getting consumers their rightful compensation. Previously, some estimated that only £740 would be the cost to the banking industry, but with word reaching more and more consumers, they are taking action to get their missold PPI compensation at a far greater rate than some thought might happen.

On average, claimants are getting £2,000 according to some estimates with £2,500 being the average reached by other analysts. Banks caught in this PPI scandal face very heavy charges, as well, in terms of additional costs for them in terms of fines and also other fees. Economic analysts say that with each PPI claim filed, consumers send a strong message to UK banks that they will not tolerate such deception in the British marketplace.

Those in the UK who need to file a PPI claim are definitely advised to pursue this action since they stand to gain quite a bit if they have been missold PPI on a credit card or in other cases. The success rate of 1ppi.co.uk is seen as a good indication that these services get those claims processed and get consumers the money they deserve.

Lloyds Banking Group Not Complying with Regulations on PPI Complaints

The biggest Government-backed bank in the UK, which consists of Lloyds TSB, Bank of Scotland and Halifax, is causing an uproar and receiving serious backlash from its own trade organisation, as well as the Financial Services Authority (FSA). The backlash comes in response to a recent move made by Lloyds to put all Payment Protection Insurance (PPI) complaints on hold. Already, the British Banker’s Association (BBA) had announced that it will seek a judicial review to put a stop to the FSA being able to force lenders to review PPI sales which experts say are well into the millions at this point. If the BBA’s members had to meet the demands of the FSA they would end up paying possibly up to 3 million victims of mis-sold PPI and the overall expense is estimated to be nearly £2 billion to those victims.

On Friday, the FSA said that banks must process complaints until the entire legal process has been completed. The BBA which represents these banks has even stated that the banks are not allowed to select which complaints they would like to place on hold. In spite of this, www.1ppi.co.uk are dealing with large amounts of PPI claims quickly and successfully.

It turns out that Lloyds Banking Group may not end up being the only dissenter among banks. In fact, Barclays has also publicly stated that it will review its own processes for handling PPI complaints. HSBC has said it will handle the complaints, but wants to liasion with the FSA in order to find a way to handle the complains. Santander will hear PPI complaints, but the Royal Bank of Scotland has not come forth with word on its own policy. This leads some banking industry observes to speculate that they believe more banks may try to dodge compensating for mis-sold PPI if they believe they can get away with it.

The UK media has been abuzz recently with the news that banks and other lenders have been mis-selling the so-called ‘protections’ which are intended to cover credit card and loan payments for those unable to work, known as PPI. This process has been going on for a number of years and in the last half decade alone, more than 1 million complaints have been lodged against firms that have mis-sold PPI. So far, the FSA has gone against 24 companies and been very vocal about warning companies against mis-selling this insurance.

According to a spokesperson for Lloyds, the banking group intends to let those settlements that they have already made with victims stand, but that they will try to wait out the court case by putting PPI complaints on hold. Lloyds has stated that the BBA knew what they intended to do. However, the FSA regulatory body has stated that the banks must do otherwise and continue to follow the rules for paying back victims of mis-sold PPI. The FSA represents UK consumers and expects the banks to follow official guidelines despite any complaints they may have about that process. The regulators may end up taking action against those banks which refuse to comply. According to the FSA, putting the processing of PPI complaints on hold is only allowed to be authorized by the FSA, the courts or an Ombudsman.

Now, many UK consumers are left wondering what they could do to try and get their PPI complaint dealt with by the banks. One route that consumers have is to speak with the independent arbitrator called the Financial Ombudsmen Service that typically needs consumers to wait 8 weeks or get a rejection from the Bank before they will get involved in a case. However, in this current situation, the Ombudsman will treat having one’s PPI put on hold as reason enough to investigate without making consumers wait. Since 81% of those who have complained to the Ombudsmen about a PPI case have ended up winning, it is a sound move for consumers. However, only a mere 5% of those who have their case rejected ever take the next step and contact the arbitrator.

Financial experts state the 81% of those taking their rejected cases to the Ombudsmen as proof that the banks are not only mis-selling PPI, but doing so in systemic fashion. That kind of epidemic means consumers have got to be on their guard and fight for their rights if they don’t wish to be taken advantage of by big banks.