Consumer groups will always stay mad at anyone trying to victimise consumers or take advantage of their situation.
But many consumers believe it’s time for PPI claims to end. They believe it would also end their annoyance and anticipation regarding their monetary claims.
According to consumer groups, the reality is that banks gain the upper hand against consumers.
Lessons Haven’t Been Learned
Why consumer groups cheered the Supreme Court over supporting the City watchdog’s PPI refund scheme is because banks have to learn their lesson.
After five years, banks still haven’t learned their lesson and instead would be receiving “undeserved relief” for a fiasco they themselves caused.
Simplifying the Process
UK banks have yet to simplify their claims process. The PPI scheme, which appears perfect on draft, banks implement with carelessness.
Lloyds has a ratio of 7 out of 10 claims wrongly rejected, according to the FCA. Several banks had delayed their consumers’ PPI claims due to an incoherent claims process for all banks.
The UK bank industry has yet to improve its own aggressive sales culture. With most bank employees pressured to increase financial product sales there is a large chance of PPI-scale scandals happening in the near future.
The FCA-launched bank probes halted by order of the UK government to make the UK still appealing to banks worldwide.
First quarter losses for RBS proves to be its eight consecutive year of disasters with almost a billion pounds lost in profits.
The majority-taxpayer owned Royal Bank of Scotland had analysts say that its shorting revenues comes from its failure to sell off its Citizens business in the United States.
Now, it has chosen to return to its investment banking operation.
According to Investec Analyst Ian Gordon:
“I remain quite positive on RBS although it currently has ongoing profit margin erosion. They are taking a principled stand on abstaining from teaser rates, but it does mean their credit card balances are falling. On unsecured personal loans, RBS has decided they are not playing at ridiculous prices, which also reduces revenues.
“And among the UK domestic players RBS is the most positively geared towards UK interest rates rising, but they are not rising. I think McEwan’s gloss on it will be that we have to wait a bit farther out [for recovery].
“It is still involved in its big restructuring, and currently it is causing more pain to the revenue line than it is taking out in costs.”
Meanwhile, Lloyds, another majority taxpayer-owned bank, has lesser struggle than RBS. Analysts expect Lloyds to recover much better than RBS. Due to its minimal investment banking business, it is spared from the fluctuating values in the industry
However, it still has a huge payment protection bill of £16 bn, which has consistently hampered its profits for the last four years.
An analyst said that he did not expect any further hit in the quarter after Lloyds’ immense £2.1 billion charge in the fourth quarter of 2015.
If anything, the UK bank industry needs to resolve its £22 bn deficit from compound interest rates of mis-sold PPI from the 1990s.
During this time, insurance policies are added with credit cards, loans and other financing. These compound payment protection insurance policies increase in value as the consumer increases his or her risk of refusing to pay their loans.
Along with these increases and decreases, an 8 per cent interest rate annually pummels bank budgets to deal with inflationary values addressed during that time.
A possible way banks can resolve this matter is if they would address all single-premium PPI complaints efficiently.
Single-premium PPI policies have a fixed value that does not change with interest rates and inflation. While the £11.5 billion repaid for single-premium payment protection insurance policies might not be final, it would help banks to determine the compound interest rate values.
Once banks finish such, a simplified and objective PPI claims method can hasten the resolution of the crisis. It would also meet the proposed deadline by the FCA once finished.
However, it can create a huge influx of PPI claims for banks, which could overwhelm their systems.
Consumer group Which? has called out the Financial Conduct Authority for its “ill-judged” setting of a PPI claims deadline by 2018.
According to the consumer champion, consumers are the only ones to lose while banks have everything to gain. Which? also specified that the opportunistic banks would use the situation to delay consumer claims for longer, effectively enabling them to save money.
The Professional Financial Claims Association also said the elderly are the most vulnerable to the deadline.
By capping fees on claims management company services, the elderly will have to wait to be serviced as much as any consumer in the market, which would cause further delays.
Currently, the mis-sold PPI total is at £32 billion. Lloyds has taken the majority of mis-sold policies with a £16 billion refund total just for itself.
Meanwhile, Which? had asked the FCA regarding its measurement of success for the PPI claims deadline.
In response, the FCA had called on banks to present proposals on simplifying and easing the PPI claims process before the deadline and advertising campaign to encourage the reclaiming of PPI refunds commences.
PPI is the biggest financial scandal in the United Kingdom with over two million consumers mis-sold insurance policies.
Consumers are disqualified from their benefits should they have had a medical condition, was at an old age or was self-employed during the time they took out the insurance.
Consumer champion Which? tells the Financial Conduct Authority (FCA) that its plan to resolve all PPI claims by 2018 is ill-judged.
It warns that banks have ‘little incentive to pay out compensation swiftly and directly to consumers in any future mis-selling scandals.’
Last October 2015, Interim FCA CEO Tracey McDermott had proposed that 2018 be the deadline for PPI claims.
This was part of the government’s plan to alleviate the ‘bank-bashing’ by hard-line former FCA CEO Martin Wheatley.
According to Which? and MoneySavingExpert.com, banks were being given “undue relief” for a problem that they were the cause.
Which? said in a statement:
“A two-year time limit would result in banks having little incentive to pay out compensation swiftly and directly to consumers in any future mis-selling scandals”.
The consumer body added: “It is clear that banks should do more to make their processes for handling PPI complaints simpler and fairer.”
The FCA had called for firms to publish their plans to handle claims and how they have handled claims until 2016. This would include the amount of redress outstanding and how the FCA will judge the success of its proposed time limit.
Payment protection insurance is old news. It’s showing its age, especially now that the City watchdog the Financial Conduct Authority is planning to impose a deadline to encourage all consumers to make a claim as soon as possible.
However, the Professional Financial Claims Association believe banks have only paid £11.5 billion back to consumers. The remaining £22 billion comes from their interests.
Interests are paid on compounded payment protection insurance policies included in loan, mortgage or credit cards owned from 1990. These amount multiply the average £3500 for single-premium payment protection insurance by twice its price.
Yearly, banks pay an additional 8 per cent interest to consumers with mis-sold PPI from the 90s.
Three sums make up the total of a compounded mis-sold PPI policy.
The actual cost of your premium is the prime multiplicand. Meanwhile, your multiplier is the interest rates that increase or decrease depending on your credit discipline.
If you haven’t been diligent in paying your dues, the premium’s value increases. You have been repaying these additional fees to your bank without your consent.
Calculating these numbers requires lots of paperwork and a complete review of all your transactions regarding your loan, mortgage or credit card.
There are other ways to earn your refunds for policies originating from two decades in the past.
Aside from the calculations of your interest rate is an additional 8 per cent interest rate that we mentioned earlier.
The deflated value of two decades in the past for the insurance policies is also taken in consideration.
Bank executives had only paid half of the total £32 billion payment protection insurance according to official figures from the Professional Financial Claims Association.
Their research showed that the UK finance industry only had £11.5 repaid to consumers mis-sold payment protection insurance.
Despite its huge bills as the biggest PPI mis-seller in the United Kingdom, Lloyds’ stocks and value still remains afloat.
Observers attribute this to their initiative to help 5,000 new exporters as part of the UK government’s campaign to improve the economy. About 25,000 first-time exporters would receive help from the bank by the end of the decade.
Lloyds has declared it is willing to spend about £450 million to improve digital technology for these exporters and training to use these new technologies.
In 2015, Lloyds has set aside more than £2.1 billion in the second half. For the entire 2015, the bank has incurred more than £4 billion for its mis-sold payment protection insurance bill.
This has brought up the bill up to £16 billion, almost half of the payment protection insurance total for the entire United Kingdom.
About £22 billion is the existing deficit of the bank industry on top of the £32 billion earmarked for payment protection insurance.
The Financial Conduct Authority released figures that indicated £23 billion had been returned to consumers since 2011. Removing the earmark and estimates, the figures indicate about £11.5 billion was repaid to consumers, according to the Professional Financial Claims Association.
About £44 billion of PPI policies were sold between 1990 and 2010. The number of policies the PFCA and the FCA have yet to ascertain.
PFCA Chairman Nick Baxter said:
“Financial Conduct Authority figures show that around £23bn of PPI redress has been paid back to customers since January 2011. But the FCA figures include statutory and account interest which is typically half of the total redress figure paid back.”
He added: “If 75 per cent of PPI sales were mis-sold, which history already shows is a conservative estimate, there is at least another £22bn to be repaid to consumers.”
The PFCA created estimates based on consumer experiences with professional claims management companies.
Every customer offer letter from more than 20 banks and financial services groups indicated that only about £195,000 in estimate was paid out and only £102,000 in estimate had been paid out, which represents more than half of the total.