Lloyds Using Loopholes to Cut Consumer PPI Refund Amounts

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.”