Lloyds will settle PPI claims
Lloyds Banking Group has announced that it will settle controversial loan cover claims, raising consumer hopes that other high street banks may soon do the same.
The bank has pulled out of legal action to stop the payout and will re-open all payment protection insurance (PPI) compensation cases currently on hold. It is also in contact with the Financial Ombudsman regarding cases that have been passed on.
Customers who had their request for PPI turned down by Lloyds in the past have been told they can re-contact the bank if they feel the decision was unfair.
However Lloyds said it would not pro-actively contact customers it suspected might have been mis-sold PPI in the past.
The bank has set aside £3.2bn to cover the cost of redress, far more than was anticipated.
Lloyds is the largest provider of PPI in the UK, responsible for about a third of all policies sold.
If the bank’s calculations are correct this could push the total cost of PPI to banks far higher than the Financial Services Authority estimate of £4.5bn.
Lloyds would not comment on the ratio of cases that may now be found in favour of customers. Before the court case between banks and the FSA most PPI claims were turned down by banks. Those complaints sent to the Ombudsman were largely found in favour of customers.
PPI was sold alongside loans such as mortgages and credit cards and was intended to cover repayments in the event of unemployment or illness. However policies were found to be sold to customers who would not have been able to claim on them, such as those with a pre-existing medical condition or the self-employed.
They were also found to have been sold policies to who were customers unaware that they had bought insurance.
“This was mis-selling on an epic scale,” said a spokesperson at Consumer Focus. “Every bank involved must now accept the consequences of their actions and give speedy redress to all affected customers.”
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