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Banks braced for extra £33bn hit over missold PPI


Banks are braced for a further £33bn hit over missold payment protection insurance ahead of an FCA decision on how to interpret a landmark Supreme Court ruling.

The Sunday Times reports banks have been using their latest interim results to warn of the implications of a ruling last year which could prompt further huge payouts over undisclosed commission when PPI was sold.

The Supreme Court issued its ruling in November in the case of Susan Plevin, who took out a loan and PPI in 2006 but was not made aware that over 70 per cent of the commission paid had gone to the lender, Paragon Personal Finance, and a broker.

The court ruled that as the commission had not been disclosed, it was in breach of the Consumer Credit Act.

One banking source told the newspaper the FCA may go for the “nuclear option” of applying the ruling to any product sold where commission was not disclosed. Another said: “Once you open the door for this, it could be apocalyptic.”

A study from Autonomous Research, chaired by former City minister Lord Myners, puts the cost at £33bn if the ruling was applied across financial services.

The FCA will rule on how widely the banks should apply the ruling by the end of the summer. It will also decide on whether to introduce a deadline for consumers to bring PPI misselling claims.



Lloyds’ total PPI bill hits £13.4bn

Lloyds Banking Group has set aside an additional £1.4bn to pay claims for missold payment protection insurance, taking its total PPI provision to £13.4bn. In the bank’s results for the first half of the year, published today, Lloyds says it is continuing to see complaints driven by claims management firms, and is paying out higher […]

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FCA hits Lloyds with record £117m fine over PPI complaints

The FCA has fined Lloyds Banking Group a record £117m for failing to properly handle payment protection insurance complaints. The fine, issued against Lloyds Bank and Lloyds subsidiaries Bank of Scotland and Black Horse, is the largest ever retail penalty issued by the regulator. The bank is now reviewing or automatically upholding around 1.2 million […]

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FCA reconsidering PPI rules after Supreme Court ruling

The FCA is considering whether additional rules are needed on the way firms handle payment protection insurance complaints, following a Supreme Court ruling. In November, the Supreme Court ruled in Plevin v Paragon Personal Finance that failure to disclose a large commission payment on a single premium PPI policy made the relationship between lender and […]

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FCA fines Clydesdale Bank £20.6m over PPI complaint handling

The FCA has fined Clydesdale Bank £20.6m over serious failings in the way it handled payment protection insurance complaints. This is the largest ever fine imposed by the FCA for PPI-related failings. The FCA says in mid-2011 Clydesdale implemented inappropriate policies which meant that its PPI complaint handlers were not taking into account all relevant […]


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There are 12 comments at the moment, we would love to hear your opinion too.

  1. What the Times did not report was that the case was referred to Manchester Crown Court for what financial restitution should be – if any.

  2. And what was the industry watchdog doing whilst all this was going on? The rules for how PPI is supposed to have been sold were in place but no effort appears to have been made to police them. Isn’t that dereliction of duty? Ultimately, the people who’ll have to fund these vast restitution payments are the shareholders and the account holders, neither of whom are in any way directly responsible, whilst the regulator seems to be getting off scot free for having failed to do its job. Hector Sants’ knighthood may be the most expensive in history.

  3. “It will also rule on a deadline for claims” sounds like a long stop to me !!

  4. Mrs Plevin was awarded the level of commission that was included within the PPI premium. Around 70% of the overall premium I believe.

  5. I do hope this will eventually also apply to Equity Release loans which also have hidden commissions to 3rd and 4th parties.

  6. Hi Harry, possibly worth looking at the case of McWilliams v Norton Finance [2015] in that regard.

  7. Christian Patricot 10th August 2015 at 10:21 am

    Diploma in Reg Fin Planning, Financial Services, regs and ethics RO1.

    Chapter 5, part 1 page 7 of CII July 2012 study text:

    Section 2 of the FSMA requires the FSA to pursue 4 Statutory objectives:

    1) Maintain market confidence in the financial system achieved by amongst others things supervising exchanges, settlement houses and other market infrastructure providers and conducting market surveillance and transacting monitoring.
    2) To contribute to the protection and enhancement of stability of the UK financial system including working with the BoE and the Treasury to deliver this strategy.
    3) Securing the appropriate degree of protection for consumers having due regard to:
    a) degree of risks of different investments
    b) differing experiences and level of expertise of consumers
    c) needs that consumers may have for advice and info; and wait for it
    d) general principle that consumers should take responsibility for their decisions
    4) To reduce the extent to which it is possible for a regulated business to be used for a purpose connected with financial crime.

    Starting all the way back to Equitable Life having been allowed to pursue a strategy that led it being forced to closed its doors, I believe the FSA has failed to pursue any of its 4 objectives: total and utter failure. The FCA it seems to me broadly continues in the same tradition.

    Yet whilst the politicians of all parties, regulators, media and general public clamour for bankers to be hang, drawn and quartered, the leaders from the FSA / FCA will amass large earnings, top jobs and gongs though they directly contributed to the ensuing financial crisis, loss of jobs, possible cuts in earnings and general malaise and depression for most of the general working population. To paraphrase the Tories, we were not and still are not in this together.

    So to show they now do their work properly, the FCA may go for the nuclear option of fining the banks £33bn. This of course will have no negative impact on the banks willingness to lend so helping the wider economy, will not affect their share price or level of dividends hence not negatively affecting the value of millions of people with pensions and ISAs, etc.

    Cheating, abuse, obvious mis-selling, illegal activity: no compromise and I have no issue with the regulators being tough.

    I would feel a lot more respect for the Regulators if they put their hand up and explain how and why they failed to meet their statutory objectives and in so doing contributed to the ensuing financial collapse. I would also like them to explain what impact their fines may have on the businesses affected and how this in turn may impact the general consumers.

    I also believe it may help them achieve their objectives of maintaining market confidence and stability in the financial market if they had an education programme reminding consumers that we live in a free society, not a communist regime and that requires us all to be responsible for taking the time to understand what it is that we choose to do. As far as I know no one and no institution has ever forced anyone to buy anything.

  8. The whole PPI saga has become a financial services ‘groundhog day’.

    One reason is that the banks/c.card companies are so fearful of regulatory opprobrium that they are paying out on virtually every claim regardless of the merits of the complaint.

    They argue that it is financially sound to pay all claims up to a certain level (maybe £3,000) rather than expend more money in tortuous investigations.

    The problem here is that when an opportunist receives a freebie he/she then tells all and sundry and they decide to insert their snouts in the trough.

    Add to this the sad reality that the entire affair taints the industry and other products with similar acronyms and you have the much wider problem than was ever originally envisaged.

  9. I did a quick calculation – let me rephrase – I tried to do a quick calculation – on a piece of paper (as my calculator wouldn’t accept a figure as high as £33 Billion). if the sums are correct (and please feel free to point out if they are wrong) – £33,000,000,000 x 30% (an average claims management company’s charge) = £9,900,000,000 x 20% VAT = £1,980,000,000. Almost 2 Billion in VAT. I can’t imagine any resistance to this from the Treasury.

  10. Christian Patricot 10th August 2015 at 3:19 pm

    On the other hand if it means banks share prices going down, Treasury gets less from selling off Lloyds and RBS, gets less in tax credit on dividend payments, gets less in corporation and other taxes if that means banks cut back on lending. Or they look at the tax to be paid by claims mgt companies plus £22bn+ received by consumers who then go and spend it and GDP may go up and all is well in the Treasury world. But is this how we want to build the foundation for “a long term economic plan” and sustainability, never mind issues such as questionable morality of the whole process?

  11. Tom you are assuming claims firms are paying VAT. No all do.

  12. Simon, I didn’t know that. I just assumed they all did.

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