Jeff Salway: PPI revelations may prove to be blessing

WE KNEW the banks wanted to draw a line under the payment protection insurance (PPI) scandal and move on.

We may, however, have underestimated the extent to which they were already going about it somewhat informally and unscrupulously.

The revelations over Lloyds’ handling of PPI complaints this week may have been shocking, but they were not particularly surprising. If anything, they merely confirmed what was
already suspected.

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Contractors at the Lloyds complaint centre were trained to reject claims at the earliest opportunity, it emerged, in the hope that consumers would be easily deterred. Most people do give up after the first rebuff, so there’s not a chance that Lloyds (or the firm running the centres) is alone in encouraging this practice.

Similarly, it’s well-known that bank sales staff were faking documents to create the impression that customers had taken out PPI willingly. What we now have is material evidence of such malpractice. Similarly, that most banks reject valid complaints has been evident for some years, aided by the regulator’s failure – again – to act in the best interest of consumers.

Why would the Financial Ombudsman Service (Fos) be upholding the vast majority of PPI complaints if the banks had handled them fairly in the first place? Almost all complaints about PPI mis-selling by Lloyds-owned Black Horse are upheld by the Fos, as are 86 per cent of those against Lloyds TSB. Those proportions have remained largely unchanged over the past three years.

No wonder the banks have been lobbying for a 2014 cut-off deadline for PPI complaints. While they have to pay for every case that goes to the Fos regardless of the outcome, they know only too well that the bulk of customers mis-sold PPI have yet to complain. A few more months of fobbing people off and they might have got away with it.

As it happens, the Lloyds scandal has put an end to neg­otiations between the British Bankers’ Association and the Financial Conduct Authority (FCA) over a deadline. For that reason the latest revelations may prove to be a blessing. The new regulator probably thought the worst of the PPI scandal had been played out under the not-so-watchful eye of its predecessor, the Financial Services Authority (FSA).

Possibly not. But the FCA – which is putting the finishing touches to a report on complaints handling – at least has an opportunity to put right what the FSA got wrong. If the banks are so keen to put the PPI scandal behind them they must be forced to deal with all mis-selling complaints swiftly and fairly.

That the PPI saga is now certain to drag on for several more years is music to the ears of the claims vultures. These firms – who will have stepped up their advertising and cold calling the moment the Lloyds investigation came to light – take up to 40 per cent of the compensation pot in return for filing claims that could easily have been completed without their input.

The good news is that action is being taken to crack down on the more unscrupulous claims management companies. The bad news is that no such thing is happening in Scotland, which is lagging behind in protecting consumers from rogue claims handlers. They’re making millions from the PPI scandal, yet north of the Border they remain unregulated and can do what they please.

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That may yet change, with claims handlers considered as part of the Taylor Review of Expenses and Funding of Civil Litigation in Scotland, being published later this summer.

In the meantime, the onus is on Lloyds customers who have a PPI complaints rejected to re-submit it. If it’s turned down again and you believe you have a case, take it to the Fos. Don’t use a claims management company. They don’t increase your chances of success, but they do have a nose for profiteering that would put some banks to shame.

Eagle-eyed readers will next week notice a marked change in Smart Money, in that it’ll be a somewhat more compact section of one page. The change means that while The Scotsman remains committed to providing personal finance content, some elements of the section will no longer appear.

They include columnists such as Gareth Howlett, James Burns of the Investment Club and Alan Steel, who has been writing for The Scotsman’s money pages since 1988. In the mid-90s Alan used his regular column to shed light on the scandal of Equitable Life well before any other UK newspaper covered the issue (and some time before the regulator caught up).

Such contributors will be missed, but The Scotsman will continue to offer dedicated coverage of personal finance every Saturday.