Yahoo News Claims Firms Get £1.7bn From Lloyds PPI Scandal
The boss of Lloyds Banking Group is demanding a crackdown on claims-handling firms as it emerged that they have reaped £1.7bn from Lloyds Banking Group's PPI mis-selling disaster.
Sky News can exclusively reveal that internal estimates compiled by the UK's biggest high street lender suggest that up to £1.7bn is likely to have ended in the pockets of claims management companies (CMCs) since Lloyds became the first bank to set aside money for the mis-selling scandal in 2011.
On Friday, Lloyds added £1.4bn to the total it had allocated to PPI compensation, taking its sum alone to £13.4bn, by far the biggest in the UK banking sector.
The ongoing tsunami of compensation has prompted Lloyds' chief executive to call for claims firms to bear the cost of processing complaints which have no underlying PPI contract attached to them.
Sources close to the bank said that the £1.7bn figure related to PPI claims submitted through CMCs, with many consumers applying for compensation directly to the bank.
Lloyds was responsible for issuing just under half of all PPI policies, implying that the total sum which may have ended up in the pockets of the claims industry might already have hit £3.5bn.
That massive windfall has caused significant unease among senior bank executives, who argue that many thousands of claims have been fraudulent, with no valid PPI policy behind them.
In his Budget this month, George Osborne, the Chancellor, announced plans for a review of the way that CMCs are regulated, to be led by Carol Brady, chairman of the Chartered Trading Standard Institute Board.
The consultation, which will be launched in the autumn, will examine the case for a cap on the fees that CMCs can charge.
Speaking to Sky News in the wake of strong half-year results, Lloyds chief executive Antonio Horta-Osorio said he supported the review "on the basis it seeks to put more or all of a customer’s compensation back in the pocket of the customer".
"We have 7000 people processing complaints, yet one-third of the complaints we receive do not have a valid PPI policy behind them," he said.
"That means a huge cost to us that we would like to avoid; it is very easy for consumers to apply directly to get all the money they are owed instead of paying a third of it to [CMCs].
"In addition, we believe that CMCs that do submit claims that have no PPI policy should bear the cost of processing that claim, otherwise it is always a free option for CMCs, which is neither fair not correct."
Barclays also added to its PPI compensation bill this week, setting aside a further £600m, while analysts at Autonomous Research said this week that the financial services industry could face an aggregate liability of £33bn for failing to disclose commission payments to customers.
Other than the mounting PPI total, Lloyds' first-half results told a largely positive story, with profits up 38% to £1.4bn and a pledge by Mr Horta-Osorio to return surplus capital in the form of share buybacks and special dividends.
An interim dividend announced on Friday will also see roughly £80m returned to taxpayers because of the Government's near-15% stake in the bank.
A series of disposals by the Treasury has raised around £13bn for taxpayers.
