PPI News

Rise in PPI Compensation Payments Goes Against S&P Prediction

May 15, 2015

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.

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FCA Identifies Fall in PPI Insurance Complaints

April 1, 2015

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.

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Provision to Pay PPI Compensation to Customers of HSBC Increased by 17%

November 4, 2014

£353 million has been added to the provision to pay PPI compensation to customers of HSBC – an increase of 17% on the bank´s existing provision.

The additional provision to pay PPI compensation to customers of HSBC is noteworthy due to the double-digit percentage increase compared with the bank´s previous provision of £2.1 billion. Although all of the leading banking groups have recently increased their provision to compensate customers who were missold PPI, only HSBC has announced a double-digit percentage increase:

· The Lloyds Banking Group recently increased its existing fund by 9% when adding £900 million to its provision to pay compensation for the misselling of PPI.

· Barclays increased its provision for PPI compensation by 4% when setting aside an extra £170 million to its existing fund of £3.53 billion.

· The RBS Group made the smallest percentage increase to its provision for PPI compensation when increasing its existing fund by 3% to £3.2 billion.

By comparison, the additional £353 million put aside to pay PPI compensation to customers of HSBC represents a 17% increase on the existing provision. A spokesperson from the HSBC Group explained that the size of the additional provision was due to an increase in claims for PPI compensation caused by greater public awareness [of the bank´s role in the scandal].

The spokesperson was accurate in his appraisal of the situation. Banking groups such as Lloyds, Barclays and RBS have dominated the headlines in the financial press, while HSBC´s role in the scandal has been relatively ignored by the media. Customers of the HSBC bank may only now be scrutinising their credit agreements to see if they were missold PPI and entitled to claim compensation.

Despite the big percentage increase in the provision to pay PPI compensation to customers of HSBC, the bank´s compensation fund may have to be topped up again in the near future. The Financial Conduct Authority (FCA) recently reported that it had received 65,865 complaints from HSBC´s customers about how the bank had handled claims for PPI refunds in the first six months of the year – 23,620 more complaints than were received about the Lloyds Banking Group.

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Credit Providers Allowed More Time to Process Claims for PPI Refunds

June 14, 2011

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”.

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