The PFCA, a
trade body that represents claims management companies, accused Lloyds of “short-changing”
consumers by exploiting a legal loophole that saved millions of pounds in
redresses.
Lloyds cites
a regulatory provision called “alternative redress”, which allows them to
assume the customers who were mis sold PPI had purchased a cheaper, regular
premium PPI policy. Single premium PPIs cost more than regular premiums, which
makes all the difference in the compensation consumers receive.
The PFCA said
that despite Lloyds using the loophole, most consumers were satisfied with the PPI
refund they receive.
PPI Expert
Cliff D’Arcy said that Lloyds had saved more than £60 million in redresses the
previous year. He said “Frankly, I’m amazed that this problem has existed
throughout the last year and hasn’t emerged into the light.”
Some
consumers who had received their PPI refund had revealed that the banks have treated
the mis sold financial product into a regular-premium PPI policy. When referred
to the Financial Ombudsman, consumers found that Lloyds owed them an additional
£500-1,000.
The survey
undertaken by the PFCA revealed that Lloyds had been exploiting the legal
loophole since February 2013, with 25% of PPI refund offers from the bank using
the regulatory provision.
D’Arcy
described it as a “scandal coming out of a scandal.”
