PPI News

Barclays has been rated as the worst financial institution for customer service for the third year running in a survey conducted by MoneySavingExpert.com.

It will come as little surprise to customers of Barclays Bank – particularly those who were mis-sold PPI – that their bank has been again voted the worst for customer service. What may raise a few eyebrows is that the service provided by the bank is considered to have deteriorated over the past year – with 20 percent of the survey´s respondents describing the customer service they received as “poor”.

Customers who have tried to recover PPI compensation from Barclays will be in no doubt that their bank deserves the wooden spoon for customer service. More than twenty thousand complaints about products and services offered by Barclays Bank have been received by the Financial Ombudsman Service so far this year – more than twelve thousand of them relating to unresolved claims for PPI.

The Financial Ombudsman Service has upheld 82 percent of PPI-related complaints against Barclays in favour of the customer, and a significant number of complaints made about the bank´s packaged bank accounts, credit cards, mortgages, investments and other insurance services. In fact, the only department of the bank´s services which is not heavily criticised is its pensions department.

The MoneySavingExpert.com survey asked customers of thirteen current account providers to give their opinions of the service they received from their banks. First Direct topped the list with a 92 percent approval rating, followed by Santander, Nationwide and the Co-Op Bank. Lloyds Bank PLC came in ninth place in the list, when many of its customers would have expected the bank to have occupied a lower position, but only the Royal Bank of Scotland came close to challenging Barclays for bottom spot.

Guy Anker, of MoneySavingExpert.com, said: “Our index shows once again the strength of First Direct’s service and the continued improvement from Santander, which used to languish at the bottom. This should be seen as a stark warning that they risk losing customers if they don’t raise their game. Anyone unhappy with the service they’re getting from their bank needs to ditch it, especially as some of the best deals are from banks with good service.”

Responding to the results of the survey, a spokesperson from Barclays said: “Our goal is not just to meet our customers’ expectations but to exceed them and to remove any cause for complaint. For this reason, we are continually working to simplify our products and services, create greater transparency and free up our colleagues to help customers.”

The half-yearly complaints data report from the Financial Ombudsman Service has revealed that the uphold rate for PPI complaints has risen to 76%.

The Financial Ombudsman Service is an independent arbitrator when disputes arise between financial institutions and their customers. Every six months, the Ombudsman publishes a table which reveals how many complaints it has received about payment protection insurance and other financial products.

As has been widely forecast, the number of new complaints about PPI has declined considerably. However, against most predictions, the uphold rate for PPI complaints – the percentage at which complaints are found in the customer´s favour – has increased substantially from an average of 60% in 2014 to 76% in the first half of 2015.

The significance of the rise is that financial institutions have for a long time been accusing claims management companies of submitting speculative claims for PPI compensation. It was expected – according to the credit providers´ allegations – that the uphold rate for PPI claims would fall closer to 50%. However, quite the opposite has occurred.

One of the reasons for such a substantial rise in the uphold rate for PPI complaints appears to be that many customers of Clydesdale Bank have not waited for the company to complete its review of PPI claims – ordered by the Financial Conduct Authority last April – before contacting the Ombudsman with a complaint. The uphold rate for Clydesdale Bank PPI claims was 85%.

However, the high uphold rate for PPI complaints against the Clydesdale Banks was yet again dwarfed by units of the Lloyds Banking Group. The Ombudsman found in the customer´s favour in 93% of PPI complaints against Lloyds Bank PLC, in 86% of PPI complaints against Black Horse Limited and in 66% of PPI complaints against the Bank of Scotland – who, for the first time ever, became the leading source of new PPI complaints with 15,002 new cases accepted by the Ombudsman compared to 13,319 new PPI cases against Lloyds Bank PLC and 12,111 new PPI cases against Barclays Bank.

The latest data released by the Financial Conduct Authority shows that PPI compensation payments have increased year-on-year for the third month in a row.

On the Financial Conduct Authority´s website, the city watchdog maintains a table recording the PPI compensation payments made each month by banks and other credit providers. The table has just been updated to include the PPI compensation payments for February 2015 – the third month in a row that PPI compensation payments have increased compared to twelve months ago.

The figure for February 2015 – £361 million – is a 9.5% increase on the £329.5 million that was paid in PPI compensation payments in February 2014. The percentage increase is similar to the rise in PPI compensation payments identified in January 2015 (£424.5 million from £389.2 million) and follows the 26% year-on-year increase in PPI compensation payments seen in December 2014.

The rise in PPI compensation payments does not necessarily indicate that more PPI claims are being submitted by ripped-off customers, just that more are being settled. It is possibly the case that banks and other credit providers are treating their customers´ claims more fairly than before – when many customers had to appeal to the Financial Ombudsman Service to recover what they were due.

Until the Financial Ombudsman Service produces its H1 report at the end of June, the reason for the rise in PPI compensation payments can only be a matter of speculation. However, the upward trend in PPI compensation payments appears to go against a prediction by the ratings agency Standard & Poor that “the worst period for PPI provisions has now passed”.

The rating agency´s prediction came in a report forecasting how much the four leading banking groups may still be liable for to pay for past “mistakes”. Since 2010, Lloyds, Barclays, HSBC and the RBS Group have paid out more than £42 billion in fines, charges and redress – not just for the mis-selling of PPI, but also for the mis-selling of interest rate products, LIBOR rigging, and the manipulation of foreign exchange markets.

Standard & Poor forecast that the four banking groups would allocate a further £19 billion before the end of 2016 to pay for their previous wrong-doings – a forecast that was followed by the announcements that Barclays was setting aside £800 million to pay fines for foreign exchange manipulation and £150 million for PPI compensation payments, and that the RBS Group and the HSBC Group were both setting aside a further £100 million towards their PPI obligations.

The Financial Conduct Authority has identified a 14% fall in PPI insurance complaints during the second half of 2014 according to the latest available data.

Firms that receive more than 500 complaints within a six month period are required by the Financial Conduct Authority (FCA) to publish statistics on their website relating to the number and nature of the complaints. The FCA then collates these statistics to monitor how many complaints are being received by financial institutions and to what financial product(s) they relate.

Since 2011/2, the complaints data collated by the FCA has been dominated by PPI insurance complaints. However, in the latest available data relating to the second half of 2014, PPI insurance complaints have seen a significant decline of 14% – the first time since late 2011 that PPI insurance complaints have accounted for less than 50% of the total number of complaints

Nonetheless, more than one million PPI insurance complaints were received by the leading banking groups in total – with units of the Lloyds Banking Group again taking first and second place on the list of the most complained about banks (figures relate to all complaints about insurance products):

1. Lloyds Bank– 183,652
2. Bank of Scotland– 179,250
3. Barclays Bank – 157,822
4. MBNA– 95,217
5. HSBC – 76,968

Speaking about the fall in the number of PPI insurance complaints, Christopher Woolard – the FCA’s Director of Strategy and Competition – said: “Today’s statistics offer a mixed picture. When you take PPI out of the equation, complaints are still on the up.  So, while the overall decreases we have seen should be welcomed there is still more for financial services firms to do. The FCA’s challenge to those firms is to put the necessary measures in place to ensure we see a consistent fall across all sectors.”

Elsewhere within the FCA´s data, the total amount paid by monitored banking groups in redress for missold PPI policies and other insurance products increased slightly from £2.34 billion in the first half of the year to £2.44 billion between July and December.

The Financial Services Ombudsman has reported that it is receiving a higher number of complex PPI complaints and appeals against banks´ decisions.

The announcement of the increasing number of complex PPI complaints was released in the Ombudsman´s second half report for 2014. The independent arbitrator of financial disputes revealed in the report that the total number of PPI-related complaints and appeals fell from 133,000 in the first six months of the year to just under 105,000 between July and December.

However, PPI-related complaints and appeals still account for nearly two-thirds of the Ombudsman´s workload and there has been a changing trend in the nature of issues customers are asking the service to resolve, which – according to Chief Ombudsman Caroline Wayman – “are becoming increasingly hard-fought and more complex”.

Despite the increase in complex PPI complaints, the Ombudsman is achieving significant results in investigating claims and appeals on behalf of customers. 82% of PPI complaints made against certain units of the Lloyds Banking Group were upheld in the second half of 2014, and 68% of the PPI complaints made against Barclays Bank PLC.

Other credit providers against which the Financial Services Ombudsman achieved significant uphold percentages included the HFC Bank (part of the HSBC Group – 83%), Citibank (74%) and Capital One Credit (60%).

Unsurprisingly, the Lloyds Banking Group and Barclays Bank PLC were identified in the Ombudsman´s half-yearly report as Britain´s most complained about financial institution. According to data available on the Financial Services Ombudsman´s website, more than 36,000 of the PPI complaints received between the second half of the year (from a total of 105,000) were made against the Lloyds Banking Group, while 15,877 complaints were made about the service provided by Barclays Bank PLC.

Other financial institutions that were recorded as failing to satisfy their customers´ expectations of service included the HSBC Group (9,740 complaints), the RBS Group (6,914 complaints), Capital One (6,289 complaints) and the Santander Group (3,917 complaints).

The fund to pay claims for a refund of PPI from Barclays has been increased once again – bringing the company´s total provision for PPI refunds to £5.02 billion.

Barclays “Interim Management Statement” for Q3 reveals that the company put aside a further £170 million to pay claims for a refund of PPI from Barclays July and September. There is no indication why the extra provision is necessary just three months after £900 million was added to the fund during Q2.

The Management Statement also reveals that the bank settled £291 million in claims for a refund of PPI from Barclays during the third quarter of the year – increasing the total amount repaid to customers since records were first kept in 2011 to £3.8 billion.

According to the Management Statement, the bank is expecting a decrease in the number of claims for a refund of PPI from Barclays, which should also result in a reduction in the cost of handling PPI refund claims.

Industry observers have identified that £5.02 billion has been allocated to pay claims for a refund of PPI from Barclays and that only £3.8 billion has been refunded – implying there is more than £1.2 billion still available for customers who were missold PPI by Barclays to claim compensation. There are two possible explanations for this sizable discrepancy:

Earlier this year, the Financial Conduct Authority (FCA) revealed that it had received 278,426 complaints about Barclays´ unfair banking practices during the first half of the year – more complaints than for any other credit provider. According to the FCA´s press release, 70% of the complaints related to claims for a refund of PPI from Barclays.

The second possible explanation is that the Financial Services Ombudsman also has a significant number of outstanding complaints about claims for a refund of PPI from Barclays. Many of the bank´s customers have complained that their claims for PPI compensation were unjustifiably rejected or that Barclays underpaid the compensation due to them.

Elsewhere in the Q3 Interim Management Statement, an allocation of £160 million has been put aside towards paying fines and redress for interest rate hedging, and a further provision of £500 million has been allocated for the bank´s alleged rigging of the foreign exchange markets. Despite these extra provisions for unfair banking practices, Barclays recorded a 4 percent increase in pre-tax profits to £1.22 billion.

BBC researchers have found that the incorrect calculation of PPI compensation is a common practice among banks and credit providers.

The researchers for the BBC radio program “You and Yours” found that banks and credit providers are frequently neglecting to include overdraft charges that were triggered by a PPI premium taking customers beyond their borrowing limits. The researchers allege that the incorrect calculation of PPI compensation is deliberate and is saving banks millions of pounds at their customer´s expense.

The researchers supported their allegations with evidence of miscalculated PPI refunds paid to customers of Lloyds, Barclays, MBNA and Capital One. All four of the credit providers investigated were guilty of the incorrect calculation of PPI compensation. The radio program also included an example of a miscalculation in which an MBNA customer had received a PPI refund of £5,800, but when his charges and compound interest were also included, should have received a refund in excess of £13,000.

Several other examples were included in the broadcast where an incorrect calculation of PPI compensation had been the basis of a PPI refund. Leading financial claims expert, Cliff D´Arcy, estimated that the total amount saved by banks and other credit providers approached £1 billion. He said that his high estimate was justified on the grounds that the fees charged for exceeding a borrowing limit are excessive, and that the practice of miscalculating PPI compensation appears to be so widespread.

Caroline Wayman – the Principle Financial Services Ombudsman – commented on the findings of the BBC´s researchers and said that, under the rules for calculating PPI compensation, “If a fee is the result of the mis-sold PPI, it should be given back, and if it’s not included in the amount [of the compensation], that would be a mistake.” She added “Any widespread failure to carry out proper calculations would most definitely be disappointing”.

The credit providers accused of the incorrect calculation of PPI compensation declined to be represented on the BBC´s broadcast; however the Lloyds Banking Group submitted a statement which was read out on the program. It said “When a customer lets us know that they may have incurred other costs because of their PPI policy, we will investigate and make an appropriate refund.”

A further £1.35 billion has been put aside to pay Barclays PPI claims – the bank hoping the latest provision will be the last for eighteen months.

Barclays Bank PLC has topped up its provision for Barclays PPI claims by a further £1.35 billion after admitting that it considerably underestimated the volumes of claims or the length of time that it would continue to receive claims for PPI compensation.

The total amount now allocated for Barclays PPI claims stands at £3.95 billion, and the bank is hoping that this will be the last time that it will have to make such a substantial provision. Barclays has refunded more than £2.3 billion to its customers who were mis-sold PPI since records were started by the FCA in January 2011, and the most recent provision of £1.35 billion is anticipated to cover Barclays PPI claims for the next eighteen months.

Barclays hopes that it will soon be in the position to tell the company´s shareholders that a line can be drawn under the PPI mis-selling scandal – although, as there is no closure date before which the banks´ customers can make Barclays PPI claims, the bank acknowledges that it could still be receiving claims for PPI compensation in ten years time.

Barclays is currently paying PPI compensation at the rate of £85 million per month and the bank claims to have contacted two-thirds of its customers that are entitled to compensation. Although the rate of Barclays PPI claims has fallen by 46 percent since its peak last May, the decrease in payments has been far slower to materialise than first predicted by the bank.

Barclays Chief Executive – Antony Jenkins – commented said that historic claims dating back from the 1980s were also pushing up its compensation bill, as banks must repay the premiums of their mis-sold PPI policies plus an additional 8 percent interest.

Mr Jenkins also announced a 17 percent fall in pre-tax profits to £3.6 billion over the first six months of 2013, and that Barclays would be trying to raise £12.8 billion via a rights issue in order to support the capital provision required by the Prudential Regulatory Authority – the authority which monitors banks´ liquidity in the event of an economic collapse.

Credit providers have been given more time to process claims for PPI refunds due to a backlog of claims developing over the past few months.

Under the rules of the Financial Services Authority (FSA), the allowed time to process claims for PPI refunds is limited to eight weeks. However, during the recent judicial review of the FSA´s new guidelines for processing PPI refund claims, a number of credit providers put a hold on the processing of PPI claims – waiting for the outcome of the legal challenge.

This temporary hold resulted in substantial backlogs of PPI refund claims developing at Barclays, Lloyds and HSBC; and the three banks appealed to the FSA to give them more time to process claims for PPI refunds. The FSA has agreed to the request, but only on the condition that consumers are made fully informed of the delays and that the FSA is kept up-to-date with the clearance of the backlog.

The new schedule for the handling of PPI complaints and processing of PPI refunds is as follows:

• PPI complaints put on hold while the judicial review was in progress must be dealt with by the end of August
• PPI complaints received since the judicial review, but before the end of August, must be responded to within 16
• PPI complaints received from the 1st September until the 31st December 2011 must be attended to with twelve weeks.

The FSA expects the time to process claims for PPI refunds to return to 8 weeks after the 31st December, and this new schedule for handing PPI refund claims only applies to the three banks that requested a revision (Barclays, Lloyds and HSBC) – all other credit providers must adhere to the existing time to process claims for PPI refunds.

Margaret Cole – the FSA´s Interim Managing Director of the Conduct Business Unit – said: “We want to see all PPI claims for compensation dealt with swiftly and appropriately. However some firms are facing a huge backlog and now a surge of new complaints which has created a bottleneck. It is not in the interests of consumers to receive further poor handling of their complaints as a result. This temporary extension means that these firms can process these complaints properly and fairly”.

The Competition Commission is implementing a “point of sale” ban to prevent mis-sold PPI on credit cards, mortgages and personal loans.

The ban on selling PPI at the “point of sale” is being implemented by the Competition Commission to prevent scenarios such as customers being told that PPI is compulsory or receiving a hard sell to purchase PPI at the time a credit agreement is signed.

Banks and other credit providers will now have to wait at least seven days after the arrangement of a credit facility such as a credit card, mortgage or personal loan before sales advisors are allowed to contact customers to sell them PPI.

The new ban upholds a ruling the competition watchdog made earlier this year to prevent mis-sold PPI on credit cards and loans at the “point of sale”. Other changes that are being implemented in order to increase competition and prevent mis-sold PPI on credit cards and loans include:

• Information being more clearly displayed
• Individual PPI quotes for credit consumers
• Annual PPI statements for credit consumers
• The ability to shop around and/or switch PPI providers

The ban was originally contested by Barclays on the grounds that a ban on selling PPI at the point of sale would be an inconvenience to customers. However, the Competition Commission ruled that customers would benefit “significantly” from the reforms and dismissed Barclays´ appeal.

The Competition Commission is also placing a blanket ban on the sale of single premium PPI policies. Single premium PPI policies are those in which the entire cost of the insurance has to be paid upfront and the single premium was often added to the finance being borrowed so that banks could charge interest on the premium.

The commission´s new measures do not apply to retail PPI – typically PPI sold alongside goods bought through catalogues and High Street stores. Research by the watchdog found that customers taking out PPI policies for retail purchases are unlikely to shop around due to the small amounts of money involved.

A commission spokesman said the new measures would prevent the mis-sold PPI on credit cards and loans and generate competition between PPI providers. As a result – the commission´s spokesman said – the cost of PPI should fall significantly.

The new measures are scheduled to be introduced towards the end of 2011.