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| Lloyds accused of short-changing PPI claimants | Lloyds accused of short-changing PPI claimants |
| (35 minutes later) | |
| Lloyds Banking Group has been cutting the compensation it pays to payment protection insurance (PPI) claimants, a BBC investigation has revealed. | |
| PPI expert Cliff D'Arcy told the BBC Lloyds had saved more than £60m over the past year by cutting compensation. | PPI expert Cliff D'Arcy told the BBC Lloyds had saved more than £60m over the past year by cutting compensation. |
| Lloyds refused to be interviewed on the issue. It was offering the correct level of compensation in line with regulatory guidance, a statement said. | Lloyds refused to be interviewed on the issue. It was offering the correct level of compensation in line with regulatory guidance, a statement said. |
| Lloyds cites a little-known regulatory provision called "alternative redress". | Lloyds cites a little-known regulatory provision called "alternative redress". |
| Alternative redress allows a bank, in specified circumstances, to assume that customers to whom it wrongly sold single-premium PPI policies would have bought a cheaper, regular premium PPI policy instead. | Alternative redress allows a bank, in specified circumstances, to assume that customers to whom it wrongly sold single-premium PPI policies would have bought a cheaper, regular premium PPI policy instead. |
| In such cases, a bank is entitled to deduct the cost of the regular premium policy from the full compensation they would otherwise have had to pay. | In such cases, a bank is entitled to deduct the cost of the regular premium policy from the full compensation they would otherwise have had to pay. |
| For claimants, this deduction can make a large difference to the compensation Lloyds offers. | For claimants, this deduction can make a large difference to the compensation Lloyds offers. |
| Mr D'Arcy, who previously worked at HBOS's PPI operation, told BBC Radio 4: "Frankly I'm amazed that this problem has existed throughout the last year and hasn't emerged into the light." | Mr D'Arcy, who previously worked at HBOS's PPI operation, told BBC Radio 4: "Frankly I'm amazed that this problem has existed throughout the last year and hasn't emerged into the light." |
| 'Unjustifiable' | 'Unjustifiable' |
| Care worker Veronica Rayner had two loans from Halifax, now part of Lloyds Banking Group. | Care worker Veronica Rayner had two loans from Halifax, now part of Lloyds Banking Group. |
| Mrs Rayner told the BBC that when she had taken out her loans she had been unaware that the bank had sold her PPI policies as well. | Mrs Rayner told the BBC that when she had taken out her loans she had been unaware that the bank had sold her PPI policies as well. |
| Her £2,300 compensation offer from Lloyds was set out in a seven-page letter with an additional two-page appendix of calculations. | Her £2,300 compensation offer from Lloyds was set out in a seven-page letter with an additional two-page appendix of calculations. |
| Mrs Rayner said she hadn't realised from the offer letter that the bank had applied alternative redress to her claim. | Mrs Rayner said she hadn't realised from the offer letter that the bank had applied alternative redress to her claim. |
| But after her claim was referred to the ombudsman, Lloyds was told to pay her an additional £1,200 of compensation - over 50% more than it had originally offered. | But after her claim was referred to the ombudsman, Lloyds was told to pay her an additional £1,200 of compensation - over 50% more than it had originally offered. |
| "I don't think it's very fair. I think they should just offer people the right amounts and get it done. It's cheating people in a way," Mrs Rayner said. | "I don't think it's very fair. I think they should just offer people the right amounts and get it done. It's cheating people in a way," Mrs Rayner said. |
| Lloyds told the BBC 11% of offers it made in the fourth quarter of 2013 were made by applying alternative redress. | Lloyds told the BBC 11% of offers it made in the fourth quarter of 2013 were made by applying alternative redress. |
| But analysis of a large survey of PPI offers undertaken by the PFCA, a trade body representing claims management companies, reveals that Lloyds has used alternative redress since February of last year - and that in some months more than 25% of offers were made in this way. | But analysis of a large survey of PPI offers undertaken by the PFCA, a trade body representing claims management companies, reveals that Lloyds has used alternative redress since February of last year - and that in some months more than 25% of offers were made in this way. |
| Lloyds would not reveal figures for the total number of alternative redress offers made earlier in the year. | Lloyds would not reveal figures for the total number of alternative redress offers made earlier in the year. |
| 'Customers short-changed' | |
| But analysis of a large survey of PPI offers undertaken by the PFCA, a trade body representing claims management companies, reveals that Lloyds has used alternative redress since February of last year - in some months reducing PPI offers by more than 25%. | But analysis of a large survey of PPI offers undertaken by the PFCA, a trade body representing claims management companies, reveals that Lloyds has used alternative redress since February of last year - in some months reducing PPI offers by more than 25%. |
| Mr D'Arcy told the BBC such widespread use of alternative redress was unjustifiable. He said such reductions could legitimately be applied in fewer than 1% of PPI cases. | Mr D'Arcy told the BBC such widespread use of alternative redress was unjustifiable. He said such reductions could legitimately be applied in fewer than 1% of PPI cases. |
| "A taxpayer sponsored bank is depriving taxpayers of their rightful compensation by using a loophole. It's a scandal coming out of a scandal," he said. | "A taxpayer sponsored bank is depriving taxpayers of their rightful compensation by using a loophole. It's a scandal coming out of a scandal," he said. |
| Claims management companies have told the BBC they have routinely been challenging alternative redress offers from Lloyds by referring them to the Financial Ombudsman Service. | Claims management companies have told the BBC they have routinely been challenging alternative redress offers from Lloyds by referring them to the Financial Ombudsman Service. |
| Martin Baker, of Swindon-based company Renaissance Easy Claim, said the ombudsman had so far ruled on more than 100 of his clients' cases. | Martin Baker, of Swindon-based company Renaissance Easy Claim, said the ombudsman had so far ruled on more than 100 of his clients' cases. |
| "In every single case our challenge has been upheld, and clients will now be entitled to full redress," Mr Baker told the BBC. | "In every single case our challenge has been upheld, and clients will now be entitled to full redress," Mr Baker told the BBC. |
| Mr D'Arcy is unsurprised that so many offers are being overturned by the ombudsman. | Mr D'Arcy is unsurprised that so many offers are being overturned by the ombudsman. |
| But he warned that, since nine out of 10 PPI compensation offers were not referred to the ombudsman, most of Lloyds' alternative redress offers were likely to go uncontested. | But he warned that, since nine out of 10 PPI compensation offers were not referred to the ombudsman, most of Lloyds' alternative redress offers were likely to go uncontested. |
| As a result, Mr D'Arcy told the BBC, "Lloyds is making substantial savings of millions of pounds a month, and customers are being short-changed". | As a result, Mr D'Arcy told the BBC, "Lloyds is making substantial savings of millions of pounds a month, and customers are being short-changed". |
| In a statement Lloyds said: "The compensation that we pay to customers is determined on an individual basis and is in line with regulatory guidance. | In a statement Lloyds said: "The compensation that we pay to customers is determined on an individual basis and is in line with regulatory guidance. |
| "The overturn rates for cases relating to comparative redress are in line with other PPI cases. These cases will continue to be reviewed on an individual basis." | "The overturn rates for cases relating to comparative redress are in line with other PPI cases. These cases will continue to be reviewed on an individual basis." |