Simon Read: It's appalling that banks are delaying over PPI payouts
Taxpayer-backed banks Lloyds and RBS said their huge bill for compensating customers flogged useless payment protection insurance was a major contributor to their massive losses announced this week. Lloyds took a £3.2bn hit for PPI compensation while RBS, which owns NatWest, was forced to set aside £850m to repay customers.
There was no detail on how many customers have had their cash repaid but, judging by figures from the City watchdog about compensation payouts, it may be as little as a quarter. The Financial Services Authority said £1.9bn was paid out in compensation last year, including £441m in December, a monthly record.
But this is less than a quarter of the estimated £8bn lenders have set aside for compensation. That suggests banks are dragging their feet about paying out, but it's also a sign that many lenders are seemingly failing to be fair with their customers. In the first place many are not bothering to contact all the people that may have been victims of mis-selling. So they may have set aside the cash, but that doesn't mean they will necessary have to pay it out. That's shabby in the first place. It could almost make you believe that the lenders don't want to repay their badly treated customers.
Next, some lenders have apparently made the process of claiming compensation overcomplicated or lengthy. Lloyds Banking Group, for instance, proudly stated last year that: "We will we provide a full response within 16 weeks of receiving the complaint."
In other words, anyone putting in a claim should expect to wait up to four months before hearing the decision from the bank. The net result of that is many claimants, unsure whether or not they may actually be eligible for a payout, could be tempted to give up, especially when the form filling and red tape takes too long. Are the banks' claim processes deliberately designed to to be so difficult as to put people off? If so, their plan hasn't worked. Instead it has opened the door to the army of claims managers cashing in on the compensation process.
They can help those people who have difficulty with the paperwork, but charge them sky-high fees for the privilege. With typical compensation payouts at around £2,750 and the firms charging 25 per cent of the compensation as a fee, it means they can trouser almost £700 on average. With some payouts being much higher, the fees will correspondingly be more juicy, of course.
When I've mentioned the claims management firms in the past, it has prompted a volley of complaints from those in the industry who consider they offer people a decent service. So let me now quote Richard Lloyd, of Which?, who this week said: "We have found dubious practice by claims management companies, including bombarding people with misleading information about getting PPI compensation."
But it's the banks who deserve our unhappiness over the whole elongated business. Once they had been found guilty they should have speedily put things right rather than using further delaying tactics. Their behaviour since the beginning when they first pushed the dodgy policies onto unwary customers has been appalling.
The longer they delay payouts, the more they punish their victims.
Mind you, it's probably better to drag your feet than not pay your bills altogether. Loans company Norton Finance sold loads of PPI policies and consequently was landed with a £2.2m mis-selling compensation bill.
Has it repaid people it flogged the policies to? No. Instead, earlier this month Insolvency Today magazine reported that Norton Insurance Services and Norton Finance (UK), the two subsidiaries involved in PPI sales, had been declared insolvent.
The directors of Norton Finance Group (not Norton Finance (UK) you understand), were apologetic. They said: "It is with reluctance we have had to close these two subsidiary companies as they traded successfully for 38 years until the regulations surrounding selling of payment protection insurance changed retrospectively last year."
So it seems they blame changes in the law for their woes rather than the fact that they were found guilty of mis-selling the cover. So where does that leave customers of the two now-insolvent firms? The Financial Services Compensation Scheme will be forced to step in.
Once the FSCS formally declares the two Norton Finance Group subsidiaries to be in default, it will deal with claims against the firm and arrange payment for compensation. However, that is likely to take many months, meaning people who used either of the Norton Finance companies will have to wait even longer for their compensation than if they were with one of the major banks.
Also there's a question of who pays the compensation. If the FSCS is forced to stump up for it, it will have to recover the money by increasing the levy it charges the financial services industry. In turn financial firms will be forced to hike charges to cover the increased cost of the levy. Eventually, therefore, normal folk like you and me will end up paying. The list may even include those who were victims of the Norton Finance mis-selling in the first place. And that seems bonkers.
But what about the staff and directors of Norton Finance who worked so hard to turn a profit by selling loans and payment insurance for all those years? Rest assuredthere's good news for them. The two bust companies traded from the same premises as another company called Norton Finance and Mortgages Limited. That company, NFM, for short, has since purchased the business and assets of both, but not the £2.2m PPI debt, of course. The statement from Norton Finance directors reads: "I am pleased to announce that NFM has acquired the businesses and all employee positions will be protected. We look forward to continuing to work with all existing introducers and partners."
I am pleased for the staff. It's never good news to hear of people losing their jobs. And I am pleased for the directors of the firm who can carry on trading with impunity having completely cleared the slate of that troublesome PPI compensation bill. And completely within the law.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
You'll need £220,000 for a minimum wage in your retirement
Questions of Cash: I checked in with Air France in time and still missed the plane
Minister's pension promise to firefighters challenged
Bank-beating exchange rates on your international payments
- 1 Planes go hybrid-electric in important step to greener flight
- 2 North Korean prison officers 'cooked prisoner's baby and fed it to their dogs', more horrific accounts from UN report reveal
- 3 Antonio Martin shooting: Mayor says there should be 'no comparison' to Ferguson
- 4 Antonio Martin shooting: Police and protesters clash over teenager's death just five miles from Ferguson, Missouri
- 5 British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens