Monday, 3 February 2014

PPI - everyone has bashed a banker

LLoyds have announced some interesting full year results today. Firstly they have added another £1.8 billion to the PPI provsion, which brings the total allocated to just shy of £10 billion.

£10 billion - that was a big rip off. I still can't believe that banks ever meant to do this in any coherent way. Yes to ripping off their customers, but no to doing so illegally. The nature of the FCA changing the rules post-hoc is worrying. In this case there is a lot upside - people get money back from Banks who they hate and the economy gets a small boost from the spending. Even management consultants get big contracts from banks to help distribute this and a large army of people have been gainfully employed in this industry.

At home, it has even made me stop ever using my landline as it is bombarded by those annoying PPI calls about 15 times a day. I am now ready for wireless 4G!

However, what about the next crisis. You see interest rates are about to go up and I worry that not only won't people be able to pay, but they are going to blame the banks for lending to them. Now that the State has stepped in to say 'mis-selling' this possibly has no end. Smart people might even complain the rates were set by Libor....

Lloyds is the largest lending of residential mortgages too - how big will the provision in the accounts have to be for the next 'scandal'; especially if Red Ed the populist is in charge next year.

16 comments:

Ryan said...

I never quite got this PPI miss-selling scandal idea.

You take out a loan and there is a cost associated with it. If you don't like the cost don't take out aloan surely? OK, maybe you had this bells-and-whistles insurance policy added in to bulk up the apparent cost, but even if you don't really want it, in the end you agreed to pay the cost of the loan.

I'm surprised the banks went along with it but perhaps by then they already knew they might be in need of some assistance later on.....

Demetrius said...

For a time now I have argued that trying to keep savings and interest out of the equations was going to cause trouble. Another disaster waiting to happen. Nicholas Shaxson points out that the "recovery" could be down to all the PPI compensation boosting consumption.

Nick Drew said...

£10 billion - that was a big rip off. I still can't believe that banks ever meant to do this

I can't believe the scale of it. I mean, I really don't believe it's true.

Even less do I believe the scale that's claimed for the soi-dissant interest-rate swaps scam

Bill Quango MP said...

Ok .. OK .. Now then ..

I was told I has to take PPI when I received a credit card. This was just a new card to replace an expired one. I already had the account. In those days you had to phone up to authorise your card, but really it was just a call so the bank could try and sell you stuff.

Anyway, on one occasion i was told i HAD to take out PPI. I said I wouldn't as I was self employed. They said I had to anyway and in the end they would not authorise my card until I wrote to the CC company and complained. Then they did saying it was a mistake.
But it was a 'mistake' that happened to me twice.

And a lady i was working with this morning had PPI added to a loan without her knowledge.
Worse.. when she was made redundant she wrote to the loan company explaining she needed longer to pay and they said 'tough..you should have taken out our easy pay PPI!"

Now she is in line for compensation. And rightly so. She has paid for insurance she never got and they never told her she had even though she asked!

And I was told on my business loan I had to take PPI. I told them no. Because
A} it would not pay out.
B} The size of the loan would be above my ability to pay it and they already had my house and all assets secured on it.

Took a long time for them to agree and I had to fight them hard.

So for an average person taking a loan for , I doubt they were even told. Or if they were, were told they had to take it. It was a scam.

A real rip-off. And not the same as borrowing to buy a house. Unless dodgy payment protection has been added or forced to be added to those that can't use.

BTW - Earlier I was forced to take out mortgage protection insurance when I switched a mortgage. I didn't want it but had to take it to get the low fixed deal. As the new rate including the mortgage protection was still less than the old rate I paid.
And was very grateful when I took redundancy and the mortgage company paid my mortgage for a year for me.

Ossian said...

The scandal is that they are digging up skeletons as fast as they can and sending the bill to HMG in the form of making provisions / depressing the share price.

No doubt when fully privatised these provisions will be released in time for them to make the post-privatisation bonuses.

Trebles all round...

Scrobs... said...

RBS/Natwest decided not to offer an open discussion on PPI from the start, preferring to put pressure on their 'customers', to 'try it on' with them.

Come and get us, 'customers'!

Now, they're chucking letters all over the place, trying to make me feel like I may need to give them a good slapping, but they're so blasted cool, they'll do me in the end.

Bastards - all of them!

I'll do my claim don't you worry sunshine! I have three years - so they say, and I may well wait right to the end, for my £650.

They've finished with me as they have all their loans paid up and dandy, but Scrobs still has a long memory, and maybe just a few names of the people he dealt with at the time just might get a mention, just so their pensions just may be on the line, or maybe they'll also get a bit of a slapping too.

Natwest?

Arseholes, and NEVER forgotten.

Nick Drew said...

I was hoping someone would name names ...

'without her knowledge' = outright crime (I think), so no disagreement there

But when you are told - no PPI, no credit card, isn't that when you say, OK I go elsewhere?

and there was an 'elsewhere', because I have been on the planet for the whole of the relevant period and I never signed for PPI as part of any credit card package

hovis said...

Nick, I'm no legal eagle,there may be other "choices" but does the the fact that the contract was not entered into with full disclosure make it null and void 'ab initio'?

Bill Quango MP said...

ND - I wasn't taking out a new credit card. I was authorising one I already had that had no protection insurance on it.
It was at the 'phone to allow card use' stage that they offered.

And when I asked what does this protection do if I am self employed they said it will still pay out.
I said it wouldn't. they said .. erm ..well it probably would.
And they tried to make a big deal out of fraud.
Again i said I'm covered already under your own terms and conditions of being a credit card provider that the government insists you operate under.

They were having none of it.
So i said get stuffed and wrote my letter.

But others may not have. Especially being told they would not be covered for fraud losses unless they were.

i am sure this was 3rd party sales setup. The 'bank' concerned probably didn't know just how inappropriately their sales people were operating. But it was way off acceptable.

And I speak as someone who used to drive at night planting balloon reggies into peoples gardens.

And if you don't know what that is... well..another post someday about diabolical sales techniques.

Nick Drew said...

balloon reggies - can't wait !

hovis - me neither: but I do dimly recall my FSA exams (well, SFA when I got qualified)

even then (90's) anything with a Derivatives connotation couldn't be enforced against a party who didn't really understand, for whatever reason (and that could include low-sophistication corporates)

ditto anything financial sold in a demonstrably deceptive / not-explained way, meaning that caveat emptor was heavily qualified

and the really annoying thing (which I have frequently puzzled over in these pages) was that the standard penalty for almost every serious infraction was "2 years gaol and/or an unlimited fine"

and how many of these bastards ever, ever do time ?

The SFA / FSA satisfy themselves simply with picking on the occasional really egregious (and useless) crook - sap of the month - almost always *acting alone* (hem hem)m and give big publicity to a medium-sized fine (which would never be paid as they'd already skipped to foreign parts)

Nick Drew said...

Bill - but £10 billion for one bank alone ?

that's 10 million people being taken for £1k each - and you've already said that some of the products sold were actually useful, to you and others

so the £1k has (in principle) to be damages, not just 'total cost of policies sold to victim'

sorry, but this just doesn't pass the 'do we believe this' test - surely these amounts must at very least be punitive, not restorative ?

Timbo614 said...

I have to come out here is support of Bill. Almost exactly the same happened to me a long while ago, probably early/mid 90s. I was self-employed. It was a goldfish card (names names). It had PPI on it, unasked for, sort-of-conditional. I cancelled it, with a deal of difficulty, after the fist renewal when I actually(unusually for me) read the policy - it would NOT have paid out.

I also advised a neighbour who was taking out a loan that had a similar policy attached. 5 year loan if I remember correctly. The PPI payments equalled 1 full years payments without the policy! And guess what? It paid out for a max of 1 year!!!

I explained carefully (numbers were not here strong point :( ) and persuasively advised her to drop the PPI off it, but such is some peoples insecurity that she took it anyway.

It was a total scam, absolutely not worth having. Even tho' she was a house holder it was an unsecured loan, what are they gonna do if you can't pay?

Ryan said...

"I also advised a neighbour who was taking out a loan that had a similar policy attached. 5 year loan if I remember correctly. The PPI payments equalled 1 full years payments without the policy!"

But that's the point as I see it. PPI makes the loan itself uncompetitive. It is dodgy selling, but does it really mean payback time?

When all the travel agents were bunging their own expensive travel insurance in the package the pols just stopped it. They didn't try to create a whole industry in historical re-imbursement.



Ryan said...

"It was a total scam, absolutely not worth having. Even tho' she was a house holder it was an unsecured loan, what are they gonna do if you can't pay? "

Reduce your credit rating to zero so you can never have another credit card or loan again, and even getting a new mortgage is difficult.

Timbo614 said...

I managed to reduce my credit rating (for any new credit) to almost zero, I owed a lot both on cards and in loans.

Paid 'em all mind you so my rating mostly back to normal now 6 years later...

Brita said...

Hello, Some people run busy lives and don't have the time. These companies are a service for these people. Secondly there is a time limit on ppi policies. Most people wouldn't sell there house on their own, they use a service to cut out the time which they never had same goes for ppi. Also the banks in alot of cases are refunding the least that they have to to costumers. By accepting an amount means you could be losing out on on a few hundred more. Never accept first offer. Work out how much is owed.Thanks you so much>>>>
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