The Lloyds banking group has announced that it has set aside about £ 3.2 Billion for compensating customers who have been missold PPI policies.
Until last year, most banks sold Payment Protection Insurance policies that were bundled with the loans and had a single hefty premium. Many customers were allegedly forced to buy such policies and as it was sold at the point of sale of the loan, the implicit connection coerced several customers to buy such payment protection policies. While the idea behind the policy is laudable i.e. the insurance pays off the loan if the borrower loses job, gets sick or meets with an accident, the cost of policies, its single premium and setting it off against the amount that is being borrowed attracted the attention of regulatory bodies such as the Financial Services Authority and Office of Fair Trading.
The courts ruled that such policies sold were not in the best interest of the customers and hence the banks should re-fund all such mis-sold PPI. The British Bankers Association (BBA) challenged this in the High Court and on 20th April, the High Court dismissed the challenge made by BBA and the banks are now saddled with a hefty pay-out bill of about £ 4.5 Billion. Banks may appeal against it and they time until end of the first week of May to do so.
The Financial Ombudsman Service has taken on more than 100,000 PPI complaints in the past year alone.
Lloyds Banking Group is one of the first banks to make a public announcement that it will compensate its customers who were mis-sold payment protection insurance (PPI). The bank has invited all its past customers to contact them if they are due for compensation. The decision of Lloyds' puts enormous pressure on other banks to follow suit.
The Lloyds chief executive Antonio Horta-Osorio, who took in March 2011, said he is abandoning the BBA's legal challenge and does not want to continue the long-standing debate with the regulators. Kesh Thukaram, Director of Best Insurance welcoming the announcement commented that it was a welcome change for banks to own-up their mistake and proactively compensate their customers. The British Bankers Association has wasted a lot of time and money in unnecessary legal battles with the regulators. We hope that other banks follow the example of Lloyds. He added that while the rationale of PPI cannot be challenged and there are thousands of people who have been benefitted by it, the coercive manner in which the banks sold such policies is deplorable. In current economic climate with continued uncertainty of jobs of people, it is prudent for customers to buy a good payment protection policy. There are several good providers and the policies need not be as expensive as the banks have been charging.
Best Insurance is widely known in the market for its wide range of highly competitive products. Apart from payment protection insurance policies, Best Insurance also specialises in unemployment cover, mortgage payment insurance and redundancy protection insurance.
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