PPI News

£117 Million Fine for Failure to Investigate PPI Claims against Lloyds

June 5, 2015

The failure to investigate PPI claims against Lloyds fairly has landed the Lloyds Banking Group with a record fine from the Financial Conduct Authority.

The Financial Conduct Authority (FCA) has issued a record fine of £117,430,600 against the Lloyds Banking Group following an investigation into the way the group handled complaints from customers who had been mis-sold payment protection insurance.

The investigation covered the failure to investigate PPI claims against Lloyds from 5th March 2012 to 28th May 2013, during which time the “complaint uphold rate” – the percentage of PPI claims that were settled in customers´ favour – fell from 82% to 26%.

The decline in upheld complaints was attributed to guidelines being issued to more than seven thousand claims handlers that Lloyds PPI sales processes were compliant unless proved otherwise. This “overriding principle” resulted approximately 850,000 claims for PPI being rejected without the required impartial investigations being conducted.

The main reason for failure to investigate PPI claims against Lloyds was that claims handlers were told to make only “reasonable attempts” to contact customers when further information was required to conduct impartial investigations. When claims handlers were unable to contact customers – and there was insufficient evidence to support a claim for being mis-sold PPI – it was considered that the customer had failed to meet their “burden of proof” and the claim for PPI compensation was rejected.

However, the Lloyds Banking Group failed to inform claims handlers of known failings in the sale of PPI that compromised their judgement. These failings included the automatic inclusion of PPI in quotes for loans, the failure of sales advisors to assess a customer´s suitability for PPI, and the faking of PPI agreements in order to meet sales targets. It was not until October 2012 that claims handlers were told that customers who applied online for a credit facility were automatically opted in to PPI.

The actions of the Lloyds Banking Group resulted in the failure to investigate PPI claims against Lloyds fairly. Some customers whose PPI claims were rejected were told that their complaint had been “fully investigated” with “appropriate weight and balanced consideration to all available evidence”, when this was not the case. Other customers, who received an offer of settlement, were offered “ex gratia” payments, rather than receiving a full refund of the PPI compensation they were entitled to.

Speaking about the £117 million fine for the failure to investigate PPI claims against Lloyds fairly, Georgina Philippou – the FCA´s Acting Director of Enforcement and Market Oversight – said: “The size of the fine today reflects the fact that so many complaints were mishandled by Lloyds.  Customers who had already been treated unfairly once by being mis-sold PPI were treated unfairly a second time and denied the redress they were owed. Lloyds’ conduct was unacceptable.”

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