Aug/101
Lloyds Banking Group stops PPI sales
Lloyds Banking Group has stopped selling the controversial payment protection insurance (PPI) across all of its brands, which include Halifax and the Bank of Scotland.
PPI covers the repayments on financial products if the borrower is unable to make them due to accident, sickness, unemployment or death. More than 90% of PPI sold in the UK is done so alongside unsecured or secured personal loans, credit card and mortgages.
Lloyds Banking Group, 41% owned by the government, has called a halt to new PPI business for loans, credit cards and mortgages, and will instead offer customers a generic leaflet on PPI produced by the British Bankers’ Association.
In figures to be released today, the Financial Ombudsman Service is expected to reveal that in the three months to 30 June an average of 149 people a day lodged official complaints about PPI, up from 135 during the last financial year. In total, there were 13,520 complaints made to the FOS in the three months to June and 49,196 in the last financial year.
Emma Parker of the FOS said: “We are continuing to get record numbers every week and we are upholding over 80% of complaints, which is well above the average for all complaints. We are still seeing complaints about products sold several years ago. We want to see firms dealing with customer complaints better in the first place.”
Almost all of the complaints received by the FOS have been about the mis-selling of the product, rather than problems in claiming on it.
The Lloyds Banking Group decision means that all its subsidiaries, including LloydsTSB, Halifax, Bank of Scotland, Cheltenham & Gloucester and Black Horse, will no longer sell PPI to customers.
Existing Lloyds PPI customers will be unaffected and their policies will run as usual. The group said it will honour all outstanding PPI applications on loans and credit cards until 31 July and all mortgage applications until 20 November.
Analysts calculated that between 2001 and 2006 Alliance & Leicester, LloydsTSB and Barclays regularly made more than 10% of their profits from the sale of PPI.
This prompted the Financial Services Authority to investigate the industry, and in 2006 it levied fines for PPI mis-sold against personal loans. Several lenders have been penalised, including Alliance & Leicester which received a record £7m fine. Last October, Which? found that just 28% of premiums collected on mortgage PPI (also called accident, sickness and unemployment insurance) are paid out in claims.
In May the Competition Commission announced it would ban the sale of the controversial insurance alongside personal loans, mortgages and credit cards, and that providers must wait seven days before contacting the customer to see if they wanted to buy cover. Barclays appealed against the proposal, and the commission is expected to announce a final verdict imminently.
In May 2009 Santander, which owns Abbey, stopped selling PPI in its branches on personal loans and credit cards, and says it will continue to review its position on mortgage PPI. Barclays says it has have phased out “the majority of PPI products” over the past year, although all existing policyholders continue to be serviced as normal.
Source: The Guardian
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