'It was a misunderstanding': Former Lloyds boss denies widespread mis-selling of payment protection insurance policies
The former boss of Lloyds Bank this morning denied widespread mis-selling of payment protection insurance policies.
Eric Daniels told the Parliamentary Commission on Banking Standards that the multi-billion scandal was instead caused by a “misunderstanding” between banks and watchdogs.
He described himself as “deeply regretful” for genuine mis-selling but said: “The vast majority (of PPI sales) are not related to that but to difference of understanding between industry and regulator.”
Lord McFall attacked the unrepentant former boss citing a series of warnings about PPI policies going back ten years. The Financial Ombudsman Service has found in favour of the consumer in 98 per cent of cases.
“It would seem as if the whole world knew about PPI mis-selling and customers being ripped off but the board of Lloyds. You were just going to go on and make your profits,” said the Labour peer.
But Mr Daniels refused to give ground. He told the Commission: “I believe customers did know what they were buying. I think they got good value.
“When we priced PPI we built the product that was the most generous in the market. We gave a very competitive price for a very valuable product and I think customers enjoyed that,” he said.
“There are a fair number of claims that were paid back that were not legitimate claims,” Daniels added.
Daniels left Lloyds in 2011. He claimed that in the early days of the PPI review a large number of claims had simply been paid back to consumers “on an industrial scale” because that was easier.
Despite tough questioning Daniels said: “I believe in the great majority of cases customers did receive a good sales product, received a product that fitted them and received a good outcome.”
He denied that Lloyds’ pay structure incentivised PPI mis-sales although he admitted that staff received more points when they sold more.
“The average salary of a member of branch staff who sold PPI was £20,000. The average bonus for those people was 10 to 15 per cent of that.
“Lloyds is not an investment bank, we do not pay telephone number bonuses. We believe outsized bonuses can distort behaviours.”
He said he believed Lloyds’ set up “did not distort behaviours”.
“Lloyds embraced treating customers fairly as a principle. Violating a customer’s trust is antithetical to building a business. We took extraordinary steps to ensuring our people were trained well,” said.
Mr Daniels said loans did not offer customers a high return and even though that improved when a PPI police was added “it was still not a high return”.
“We are looking at a point in time in a fairly partial fashion,” he said. “We were living in a very benign economic time. You would see the returns from that product go down at a time like now when unemployment is rising.”
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