Lloyds Admits Errors After PPI Mis-Sell Sting

Lloyds Banking Group has confirmed it is retraining staff handling insurance mis-selling claims from customers, after an undercover reporter revealed numerous allegations of misbehaviour.

The Times said that a staff member underwent recruitment and training to work as a payment protection insurance (PPI) complaint handler and discovered that "they were taught to play the system to the detriment of clients".

Among the allegations published is that Lloyds worked on the principle that Lloyds salesmen never mis-sold PPI.

However, the reporter discovered that some of the original loan salesmen had forged documents and was told some paperwork was missing from customers' files.

The Financial Ombudsman said that Lloyds rejected the highest number of valid mis-selling claims, at 84%.

The paper added that complaint handlers were told to effectively turn a blind eye to the risk of fraud, and that most customers would give up pursuing PPI mis-selling claims when the bank's first rejection was given.

In an audio recording made by the Times, obtained by Sky News, a trainer can be heard telling potential complaint handlers that PPI salesmen may have often ticked boxes without consent.

The trainer says: "They've ticked 'yes' on the ... form. And they've said they didn't realise the policy was optional.

"Well, they've ticked it, so the likelihood is they did know. Although, some of the advisers used to tick it. We all know the adviser did, because that's what happened."

"And having worked in the industry, you work with people who used to work in banks who used to do it themselves."

In response, Lloyds said that it had independently identified issues and terminated a contract with 'big four' accountancy firm Deloitte, which ran the complaint unit on behalf of the bank.

Lloyds said in a statement: "Earlier this year we became aware of issues at a PPI complaints handling centre called Royal Mint Court in central London.

"This site was operated for us by a third party supplier, Deloitte. Following further investigations we took immediate action, and in May concluded our contract with Deloitte and moved to a new supplier.

It added: "Some of the comments made by trainers to the Times reporter are not endorsed by Lloyds Banking Group and we believe they do not reflect our high training standards or our policies.

"We believe the comments to be isolated and they are now being addressed. Following the discovery of these issues and under the guidance of a new supplier the employees are currently undergoing retraining in line with our policies and procedures."

Deloitte employed 1,300 contract staff with the unit at the Royal Mint Court, to help deal with millions of complaints of PPI mis-selling. Lloyds employs more than 7,000 across Britain to deal with mis-selling.

Deloitte sub-contracted City recruitment firm Momenta to hire staff for for the Royal Mint Court but rules of the watchdog the Financial Conduct Authority (FCA) stipulate that Lloyds remains responsible even if outsourced to a third party.

The Momenta website homepage advertises for graduate PPI complaint handlers and offers annual salaries of £23,000.

Momenta also advertises for non-graduate PPI handlers with between three and six months' experience, offering them daily rates of between £170 to £190.

Located in Tower 42 and with a staff of around 40, Momenta operates five separate companies including Momenta Holdings (PPI) Ltd, which holds the copyright for its website.

In the says more than 17,000 "associates" have been employed in the sector. PPI processors are not employed as staff members by Momenta, instead applicants must work as a contractor through a limited company or "register through an umbrella company".

Momenta saw revenue growth of 82.3% in 2011-12 to £58.7m, following on from growth of 41.2% and 49.8% in the two previous reporting periods, according to its annual accounts.

The accounts ending March 2012 revealed a pretax profit of £1.386m and its race car fan CEO Richard Stevens said: "The outlook for the current year is extremely positive with yet further dramatic increase in turnover confidently expected.

"Given the overall position of the business, I look forward to the future with continued optimism and a good deal of confidence that I will be able to again report similar successes in 2012-13."

No remuneration was paid by the company to its three directors, Mr Stevens, finance director Tim Peart or operations director Lee Davies, however their limited liability partnerships - RTL (London) LLP and RTL Management Services (London) Ltd - received £3.66m in management fees.

PPI mis-selling has become one of the biggest scandals ever to rock the banking sector and so far Lloyds has paid out £4.3bn to some 1.3 million victims of its PPI mis-selling.

Collectively, financial institutions have been forced to set aside more than £12bn to cover for wrongdoing. Many mortgage customers were sold insurance that was neither needed nor able to make a claim against.

The FCA told Sky News: "We are aware of the issues raised by The Times and have been working with Lloyds Banking Group since earlier this year to ensure these are resolved and the interests’ of consumers are properly considered.

"We expect all firms to comply with our rules and treat their customers fairly. Firms know that PPI complaints must be thoroughly investigated and that appropriate action, where required, is taken promptly.

"Our rules are very clear that firms are expected to learn from previous complaints. So if there are significant numbers of complaints coming in about the same thing – that is a clear warning sign that something isn’t right.

"In our Business Plan, published in March 2013, we confirmed that we were carrying out reviews of firms’ PPI complaint handling procedures. We intend to publish the findings of these reviews later this summer."

Deloitte told Sky News: "Deloitte’s role was to process PPI mis-selling complaints from Lloyds Banking Group customers who were sold policies by the bank, in accordance with the bank’s policies and procedures.

"We cannot, however, comment upon the specifics of this matter due to reasons of client confidentiality."

:: In early Tuesday trading shares in Lloyds dropped 0.7% before easing to 0.59% down.