Banks not playing fair on PPI compensation claims

02 May 2014

Whether many people will be surprised at this news remains to be seen, but regulators, policy makers and the media are rightly rather frustrated that certain banks are not playing fair on PPI compensation claims.

A recent BBC investigation has found that Lloyds Banking Group, made up of brands including TSB, Halifax, Bank of Scotland and Midshires to name but a few, has saved itself over £60 million in the last year by cutting the amount it is paying out to consumers for PPI compensation claims. Luckily the Financial Ombudsman seems to be wise to this tactic and has been requiring the banks to increase their PPI compensation claim payouts when reviewing complaints brought about by consumers.

The concern for all of us helping consumers get a fair PPI compensation amount is all those people who might not realise that these tactics are impacting on their payouts. In this scenario, ‘alternative redress’, whereby banks could and indeed are in certain cases presuming that consumers would have purchased a lower cost PPI policy if their existing policy hadn’t been purchased is being used to calculate a significantly lower compensation figure. This in turn is then often hidden in reams of small print in offer letters, meaning that it isn’t always obvious and isn’t always picked up on when reviewing and accepting the bank’s offer.

In other recent news, it transpires that Barclays has also been caught thanks to a whistle-blower who alerted the Financial Conduct Authority. According to the news, errors have been occurring in how the bank has been calculating the taxation of interest paid to PPI compensation claims.

The HMRC in October 2013 started requiring banks to deduct tax on the interest of PPI compensation claims at source, but this appears to have not fully spread throughout Barclays business and operations until around 6 months after the HMRC’s changes. Due to the fact that Barclays did not fully reconcile this aspect of PPI compensation claims for a period of time, there could well be consumers receiving payouts that have not paid the correct amount of tax deducted and do not realise that they have not had the full payout they deserve, or conversely that they owe taxes they don’t know about to the government.

While the HMRC should be applauded for trying to insert some standard practices and expectations into the tax consumers need to pay on the interest ‘gains’ of PPI compensation claims, the banks and building societies need to feed this through their policies, practices and procedures in a clear and open manner. Unfortunately, as the PPI debacle continues to play out, it is clear that not everyone is doing everything they could on this front.

Don’t get stung by PPI – after all, you’ve already been stung by it once! We can help put you in touch with a UK based expert that will help you get the maximum you deserve from your PPI compensation claim as well as ensure that all taxes and other factors are properly understood and catered for. Just fill out our quick form and we’ll put you in touch with someone who can make sure your case is dealt with fully and fairly.