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Another £400m Into RBS’ PPI Compensation Fund, Says Missoldppiclaims.info

The Royal Bank of Scotland has earmarked an additional £400m to cover the cost of compensation and refunds relating to mis-sold payment protection insurance (PPI), says leading PPI Claims Company Missoldppiclaims.info.

The nationalised bank has released figures for the last quarter showing a pre-tax loss of£1.26bn, a proportion of which is due to the allocation of a further £400m to its PPIcompensation fund. In a move echoed around the banking industry in recent months, RBS now has increased its total PPI allocation to now stand at £1.7bn. However, it is unlikely to be the end of the compensation claims for the beleaguered bank.

Its recent computer problems resulted in significant numbers of RBS, Natwest and Ulster Bank customers being locked out of their accounts for days, a mistake which has cost£175million so far with a further £50m of compensation put aside.

RBS is also part of an investigation by regulators in the UK, US and Asia – including the fraud division of the US justice department – over the part it played in the manipulation of the LIBOR inter-bank lending rate. With settlement negotiations imminent, the fines that could potentially be applied RBS believe could have a “material” impact on the company.

Despite the problems, RBS showed operating profits for the third quarter increased from£650m to £1bn, while bad debt fell by £159m and staff costs were 5% lower due to a 7% reduction in staff.

Stephen Hester, chief executive of RBS, said: “The extraordinary challenges which RBS faced following the financial crisis are being worked through successfully. The five year restructuring plan is now in its later stages with important work still to do, including an emphasis on dealing with reputational issues now that the bank’s safety and soundness has advanced so well.”

A spokesperson for leading PPI Claims Management Company, Missoldppiclaims.info said: “It’s good to see RBS recognising its responsibilities towards customers that were mis-sold PPI policies, in particular the responsibility to put customers first and treat them fairly. This can be seen in its decision to increase lending to its business customers even though there was a downturn in loan applications, but it would be good to see a similar helpful response to borrowing for its non-business customers with personal loans and residential mortgages.

The reputational issues Mr Hester refers to are likely to be industry criticisms that RBS customers play second fiddle to the short-term interests of shareholders and staff. As a result, RBS has relaxed its lending position towards its small and medium (SMEs)businesses, which has led to a an increase of new lending by 3% since the second quarter despite a 25% drop in SME loan applications due to the Olympics and doubts over the stability of the UK economy.

Analyst Richard Hunter, head of equities at Hargreaves Lansdown, said: “There is no doubting the immensity of the task RBS has faced in executing its turnaround plan, nor indeed the progress made so far.”

Via EPR Network
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Business, Financial, Financial Information, Financial Services, Insurance, Insurance Services, Money

Possible £2.7bn Bill for PPI Reclaim Compensation

The Financial Services Authority has announced that compensation for mis-sold PPI reclaims could reach as much as £2.7bn and involve 2.75 million people in the UK. Complaints regarding PPI reclaims are expected to rise to over 550,000 per year for the next five years, with compensation for PPI reclaims varying from £900 – £1,800 per person.

The FSA found ‘wide and deep evidence of weakness in PPI sales’ over the last five years and warned lenders they have until December 1st 2010 to adopt a new set of rules that deal with PPI reclaim complaints, key features of which include:

  • If the customer would not have bought the policy in the first place, the PPI premiums plus interest should be reimbursed.
  • If the customer was persuaded to buy a premium with a single up-front payment instead of a regular premium policy, the customer should be reinstated to the position they would have been if they had done.

Dan Waters of the FSA said: “The rules are the culmination of months of hard work and now, with these measures, we look forward to consumers being treated fairly whether they are buying or complaining about PPI. Since we took over the regulation of PPI we’ve carried out 24 investigations and three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans, visited over 200 firms, and handed out some very significant fines.”

Lenders up in arms about new PPI reclaim rules

Many have argued the new PPI reclaim rules are unnecessary and disproportionate, with lenders waging a behind-the-scenes campaign to stop the new regulations from being instated.

However, the FSA is adamant the new rules are necessary given the behaviour of some lenders when faced with dealing with PPI reclaims. Some lenders have been automatically turning down almost half of the PPI reclaim complaints they receive with others have been rejecting every single one. Of those customers who had their PPI reclaims rejected, 1 in 3 turned to the Financial Ombudsman Service for help and 80% had their complaints upheld. Such is the extent of the problem, last year the FSA instructed lenders to open up 185,000 rejected PPI reclaims and review them.

For claims comparison site, writeoffloan.com, the behaviour of the lenders is nothing new. “The new FSA rules are incredibly welcome, For years lenders have been mis-selling PPI insurance alongside loans to everyone they could. Often they knew the premiums to be unnecessary or that the customer would be unable to claim on the policy because they were exempt from doing so when they took them out. Sometimes they didn’t even bother telling the borrower they were adding a PPI premium. Customers had no idea they even had an insurance policy.”

The spokesperson added; “The numbers of people coming to us for help with PPI reclaims has risen dramatically over the last 12 months and some of the stories we are hearing are quite shocking. It’s quite obvious the lenders are banking on people being disillusioned and put off when they repeatedly reject their PPI reclaims. That’s why many people need a helping hand from companies like ours to deal with the tactics of these unscrupulous lenders who have simply instated a blanket ban on dealing with PPI reclaims regardless of the merit of the customer’s case. Luckily we understand PPI reclaim law and aren’t so easily put off by the tactics of lenders”.

The Competition Commission is also expected to announce a ban on selling PPI policies at the point when someone is granted a loan. Some lenders however have realised the game is up and have already stopped offering polices, including HSBC and Lloyds.

Via EPR Network
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