Wheatley Lambasts Outrageous PPI Mis-selling

Martin Wheatley, the CEO of the Financial Conduct Authority (FCA), is currently appearing before the Treasury Select Committee. He is less than impressed with the fallout from the PPI mis-selling scandal and the way that the banks are handling complaints.

Currently the FOS is upholding 90% of PPI mis-selling cases referred to it after they had been rejected by the banks.

Wheatley says it is "absolutely not acceptable" and that it is "outrageous" that the number upheld by the FOS is so high. He stated that the FCA has been looking into how banks handle complaints, as per the Telegraph:

"We have taken action and we will take more action and we will continue to look at how banks handle complaints. 

We've got two large investigations underway and have two cases where we have issued strong fines."

Sadly PPI mis-selling is but one of many areas where Britain's financial services industry mired itself in its own shit.

Banks Delay PPI Claims

In March I noted that the financial ombudsman service (FOS) was taking on 2,000 new PPI complaint cases a day, with numbers rising at "unprecedented" rates.

I went on to note that it was clear that the banks were trying to delay payouts:

"Needless to say, as the number of referrals to the FOS rises, so does the length of time it takes for the ombudsman to make a determination. It seems that the delays are also increasing because some companies are causing unnecessary delays.

Natalie Ceeney, chief financial ombudsman, is quoted by the BBC:

"As the complaint levels show no sign of slowing, consumers are increasingly having to wait longer to get their complaints sorted - with many businesses still continuing to cause unnecessary delays.

Where businesses have shown a real commitment to better customer service and diligent complaints handling - including actively engaging with the ombudsman - cases are resolved more quickly and easily, to the benefit of everyone."

None of this is surprising, those who were sold PPI will see this as an opportunity to try to obtain a refund (irrespective of whether they were mis-sold PPI or not) and the banks will do everything they can to try to reduce the costs of the claims.

That being said, had the banks not incentivised their staff to sell policies that were in many cases clearly inappropriate to people who didn't need them/couldn't claim on them when they needed to, then this entire mess could have been avoided.

The greed of the banks is now being repaid by the perspective that the banks' customers have that there is "free" money to be made.
As the old saying goes, "what goes around, comes around".

A claims management company, Emcas, has now also said that banks are rejecting around a third of claims from customers. Ironically, as per the Telegraph, the Financial Ombudsman Service (FOS), which deals with complaints rejected by the banks, is upholding the majority of PPI claims.

Why such an anomaly?

A cynic would argue that the banks are trying to slow things down in the hope that those claiming simply give up.

Needless to say the British Bankers' Association denies that banks were deliberately turning down legitimate claims in the hope that they would avoid having to pay up.

Make of that what you will.

Irrespective of what obstacles (real and imaginary) are put in your way by the banks, do not give up; if rejected by the bank make a claim direct to the FOS, do not use a claims management company (which will charge you a percentage of any compensation that you receive).

The £60BN Banking Black Hole

The shareholder group PIRC has done a calculation that warns of a potential black hole in the accounts of British banks, relating to bad debts the banks may have to write off in coming years but have yet to subtract from profits, together with other items such as deferred bonuses not booked.

Amongst those with potential black holes are HSBC with £10.4BN of hidden losses, the Royal Bank of Scotland with £9.4BN and Barclays with £7.3BN.

PIRC applied old-style UK GAAP accounting rules, which applied for 100 years until 2005, to the figures released in the 2012 banks’ accounts.

Basel rules require banks to declare half the expected losses over a year. However, bad loans and expected losses do not appear in the banks’ accounts under International Financial Reporting Standards (IFRS).

The Telegraph reports that the Bank of England has suggested the total could amount to £60BN.

This needless to say means that those politicians who hope that banks will increase lending are pissing in the wind, as banks are scrambling to build up their balance sheets in preparation for the next self inflicted financial disaster (such as PPI mis-selling).

Ombudsman Swamped By PPI Claims

Unsurprisingly, the PPI mis-selling scandal (one of the many scandals that have destroyed the reputation of the UK's financial services industry) continues to hit the headlines.

The financial ombudsman service (FOS) reports that it is taking on 2,000 new cases a day, with numbers rising at "unprecedented" rates.

The BBC reports that the FOS received 211,885 new PPI complaints in the second half of 2012. These accounted for nearly 75% of the 283,251 new complaints sent to the ombudsman during the six months.

The average that a successful claimant receives in compensation is around £3K, representing a gross cost to UK banks of £15BN.

Lloyds TSB Bank had the highest number of PPI cases referred to the ombudsman of any institution during the second half of the year, but the ombudsman found in the customers' favour in 86% of the cases against the bank.

Needless to say, as the number of referrals to the FOS rises, so does the length of time it takes for the ombudsman to make a determination. It seems that the delays are also increasing because some companies are causing unnecessary delays.

Natalie Ceeney, chief financial ombudsman, is quoted by the BBC:

"As the complaint levels show no sign of slowing, consumers are increasingly having to wait longer to get their complaints sorted - with many businesses still continuing to cause unnecessary delays.

Where businesses have shown a real commitment to better customer service and diligent complaints handling - including actively engaging with the ombudsman - cases are resolved more quickly and easily, to the benefit of everyone."

None of this is surprising, those who were sold PPI will see this as an opportunity to try to obtain a refund (irrespective of whether they were mis-sold PPI or not) and the banks will do everything they can to try to reduce the costs of the claims.

That being said, had the banks not incentivised their staff to sell policies that were in many cases clearly inappropriate to people who didn't need them/couldn't claim on them when they needed to, then this entire mess could have been avoided.

The greed of the banks is now being repaid by the perspective that the banks' customers have that there is "free" money to be made.

As the old saying goes, "what goes around, comes around".

The PPI Ill Wind

The old saying "it's an ill wind that blows nobody any good" has been proved by some statistics released by the Financial Ombudsman Service (FOS).

The FOS, which deals with PPI claims when banks and their customers cannot agree a settlement, said it had increased the number of expected new cases for the 2011/2012 financial year to 375,000.

In view of this increased workload it has taken on 1,000 extra staff to deal with the backlog.

RBS Take PPI Hit

Yesterday I wrote about Lloyds upping its PPI claims provision, today it's the turn of RBS.

Royal Bank of Scotland this morning reported a £1.38BN Q3 loss after taking a £400M provision against the cost of payment protection insurance compensation costs, for good measure it also booked a £1BN charge against the value of its own bonds.

The Telegraph reports that the total amount of money put aside by the bank to pay claims now stands at £1.7BN, having paid out £1BN thusfar.

RBS said that it was possible the cost of PPI compensation could grow further still.

Lloyds PPI Chickens Coming Home To Roost

The old saying "what goes around, comes around" springs to mind when reading that Lloyds has been forced to make an additional PPI provision in Q3 of £1BN.

The total amount set aside by Lloyds for the PPI mis-selling scandal is £5.3BN, giving rise to a Q3 loss of £144M.

Lloyds has paid out £3.7BN in compensation thus far. However, it may have to make further additional provisions next year.

The Telegraph reports that Lloyds is less than pleased to be on the receiving end of fraudulent claims for compensation, driven in part by the plethora of claims management companies that are pushing people to make claims. Lloyds has written to the Financial Ombudsman Service asking for claims management companies to be forced to meet the cost of spurious requests for compensation.

Scam PPI Claim Company

Beware calls from this number 02392997556, according to this thread it is a scam designed to acquire your bank details.

The Stench of Corruption and Greed Overwhelms Britain's Financial Services Industry

Britain's tarnished financial services industry and banking sector seems intent on bringing about its own self destruction. Over the years there has been a litany of scandals eg:

- endowment mis-selling
- subprime mortgages
- PPI mis-selling
- LIBOR fraud
- NatWest computer meltdown
- Northern Rock, RBS etc etc to name but a few

However, it seems that the industry is determined to add to its list of self inflicted shame and dishonour. Step forward the usual suspects ie; Barclays (a familiar name), HSBC, Lloyds and RBS which have all admitted to mis-selling interest rate hedges to small and medium sized business customers.

Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have all agreed to immediately halt the sale of complex interest rate hedges to smaller businesses and have pledged to compensate potentially thousands of customers who have been screwed by them.

According to the Telegraph the FSA is of the view that about 28,000 businesses had been sold interest rate hedges.

Another nail in the coffin of the tarnished reputation of the UK's financial services industry.

The financial services industry is now fully immersed in its own self created shit, and quite clearly is on the verge of implosion.

Snouts In The Trough - Bogus PPI Claims

The Financial Ombudsman has, according to the BBC, stated that nearly 6,000 people submitted bogus compensation claims for mis-sold Payment Protection Insurance (PPI) on policies that they had never taken out.

The problem has been exacerbated by the activities of certain claims firms, who appear to be less than honest/ethical.

This rather proves the old saying "what goes around, comes around", as companies that unethically sold these useless policies are now on the receiving end of equally unethical treatment/practices.

"Free" Money - The Great PPI Giveaway

Courtesy of the greed and lack of ethics of our tainted financial services industry, there are billions of pounds to be "given away" by the recalcitrant banks and lending institutions that conned people into buying the now widely derided Payment Protection Insurance (PPI) policies.

Simon Gompertz has published the headline figures:

"The extraordinary scale of the PPI compensation grab:

£5bn compensation still to be paid out

12 million policies may have been mis-sold

800 claims management companies  trying to get a slice of the money

£2m a month being spent on advertising by these claims companies

They charge 25% or more in fees, plus VAT

Banks are making 50,000 compensation payments a week

That's around £400m a month being paid out

The payments average £2,750, some are £16,000 or more

Some say this massive cash payout could give a boost to the economy

How to claim compensation? Contact your bank, or the Financial Ombudsman Service"

Given that the banks showed no ethics in selling these now widely derided products onto their naive customers, there is no shame in asking for them to pay the money back (but don't waste money on using a claims company).