Lloyds Banking Group has taken a further £350m hit for mis-selling payment protection insurance (PPI), swelling what was already the banking sector’s biggest bill for the scandal.
The lender made the extra PPI provision after the City watchdog earlier this month set an August 2019 deadline for filing claims against banks, which was two months later than originally proposed, and announced it would push firms to contact potential victims of the scandal. It takes Lloyds’s total hit for PPI to almost £17.4bn, the single largest bill for mis-selling the insurance of any lender.
The PPI scandal has dogged the industry, and Lloyds in particular, for years but there were hopes the shadow it had cast was starting to recede.
Last October, when Lloyds disclosed it had set aside £1bn to cover the cost of mis-selling claims, finance chief George Culmer said “it would be the last big PPI provision that we would expect to take”.
However, the Financial Conduct Authority’s (FCA) decision to move the so-called timebar for claims from June 2019 to August 2019 and the ramifications of a PPI legal battle – the Plevin case – have forced Lloyds to make this new provision.
In 2014, a supreme court judgement in a case brought by college lecturer Susan Plevin against Paragon Personal Finance found that if a firm selling PPI did not disclose to a customer that it had earned a commission from the product’s provider, then the sale was unfair under the 1974 Consumer Credit Act.
The FCA has concluded that a sale with a commission of more than 50pc is too big, giving consumers fresh grounds for complaint and so potentially ratcheting-up the PPI bill for banks. The regulator is now forcing all firms to contact previously unsuccessful complainants to inform them that they can now lodge a fresh complaint in the light of the Plevin ruling.
“The additional provision has been taken to reflect the estimated impact of the [FCA’s] policy statement including the revised arrangements for Plevin cases, which includes a requirement to proactively contact customers who have previously had their complaints defended, and which is likely to increase estimated volumes and redress,” Lloyds said today.
“The policy statement also confirmed a two month extension to the time bar to the end of August 2019.”
The bank, which is now less than 4pc-taxpayer owned and is led by boss Antonio Horta-Osorio, plans to book the provision in its first quarter results, which are due to be published next week. However, it said the guidance it had given investors for its financial performance was unchanged by the £350m hit.
It comes amid growing expectations that Lloyds, which was bailed out during the financial crisis, is a matter of weeks away from being fully returned to private ownership. The pace of Government share sales suggests its remaining stake will be offloaded entirely by early May.