The Telegraph

LLoyds stops selling PPI due to Claims

The Telegraph

PPI: Barclays to appeal against point-of-sale ban
Barclays is to appeal against a ban on lenders selling payment protection insurance at the same time that the underlying loan is sold.

Barclays is contesting the findings of a 23-month investigation by the Competition Commission on PPI. The commission said in January that lenders shouldn’t sell PPI at the same time as a loan. It also banned single-premium PPI, when the repayments on the credit and the insurance premiums are shown as one sum.
“The main area of concern is the point-of-sale ban which, it is felt, is not justified by the evidence that has been provided,” Barclays said in a statement. “Additionally, the scope of the market definition set by the Competition Commission is being challenged.”

Barclays isn’t challenging the whole of the commission’s report. It’s asking the tribunal to make the commission reconsider the ban and pay its costs.
PPI, which generates as much as £5.5 billion of annual revenue for British banks, is sold to cover payments on loans and mortgages in case of sickness or unemployment. The product has come under scrutiny from regulators including the Financial Services Authority, which decided in February to ban single-premium PPI.
The Competition Commission said: “We’ll defend our case vigorously and, given that we’ve identified what we think are long-standing problems with the PPI market, we’ll want to minimise any delay this causes to implementation of the remedies.”
Barclays has already stopped selling single-premium PPI after 20 FSA enforcement cases, one of which resulted in a £7 million fine on Banco Santander's Alliance & Leicester for aggressive sales.

LLoyds stops selling PPI due to Claims

The Telegraph
PPI: Banks to be banned from selling alongside loans, Competition Commission rules
The Competition Commission is to ban the sale of payment protection insurance (PPI) alongside credit agreements.
Banks and other loans providers will be banned from trying to sell the controversial insurance policies to borrowers within seven days of the loan being taken out.
The commission is introducing a package of measures to boost competition in the market, including personal PPI quotes for consumers, annual statements on the cover, and better information to make it easier for people to shop around and switch provider.
In its final report, it said the vast majority of the UK's more than 12m PPI policies were sold at the same time as people took out credit cards, loans or other credit agreements, with many consumers unaware that they could buy PPI from other providers.
It said this point-of-sale advantage made it difficult for other providers to reach credit customers, leading to consumers being charged high prices.
In a previous report it estimated that the lack of competition in the market was leading to consumers being overcharged for PPI, which covers debt repayments if the holder is unable to work due to an accident or illness or if they lose their job, by £1.4 billion a year.
Peter Davis, inquiry chairman and Commission deputy chairman, said: "These are significant measures carefully designed to address the serious competition problems that currently exist in this market.

LLoyds stops selling PPI due to Claims

The Telegraph
PPI: Swinton fined £770,000 and to refund 350,000
Swinton, the insurance broker, has been handed a £770,000 fine by the Financial Services Authority (FSA) for mis-selling controversial payment protection insurance (PPI) policies.

Under an agreement with the FSA, Swinton will contact over 350,000 customers who paid for PPI and offer them a refund.
Swinton's PPI sales process was "flawed", the FSA found, because of an "assumptive" selling technique in which PPI was automatically included in insurance quotes without first establishing that the customer had any real demand or need for the PPI cover. "This resulted in unacceptable levels of non-compliant sales," the regulator said.
PPI policies have been criticised for including hidden exclusions that make it difficult to claim successfully. While Swinton sold over 500,000 policies, only 266 claims were paid out, the FSA said. "Swinton did not put in place any or any adequate system for establishing that the PPI was suitable for the customer before the recommendation was made," it added.
"Swinton's sales process provided customers with inadequate information about the significant features of the PPI at the point of sale and the firm's sales process included statements about the extent of the PPI cover which did not adequately explain the features and benefits whilst at the same time explaining the complex limitations and exclusions."

LLoyds stops selling PPI due to Claims

The Telegraph
Other banks are expected to follow the lead of Lloyds Banking Group and stop selling controversial payment protection insurance, experts say.

Taxpayer-backed Lloyds Banking Group confirmed last night that it had stopped selling the cover alongside loans, credit cards and mortgages from last Friday.
The group attributed its decision to the uncertainty surrounding the regulation of PPI, after the Competition Commission said earlier this year that it planned to go ahead with a ban on the sale of the cover alongside credit agreements.
But Lloyds said it thought the changes in regulation would make it "uneconomic" for it to continue to offer the product in its current form. It will instead issue customers interested in PPI with a generic leaflet produced by the British Bankers' Association.

A number of other banks are also reviewing their decision to sell the insurance.

HSBC stopped selling PPI as a stand-alone product in 2007, and instead offers it as part of its Life Choices cover, which enables consumers to take out a range of insurance covers, such as life insurance, critical illness cover and PPI, in a single product.

Royal Bank of Scotland and NatWest only offer the cover with mortgages and loans of between £25,000 and £35,000, but this is under review, while Nationwide also only offers it with mortgages.

Barclays is also in the process of phasing out the sale of the cover alongside a number of its credit products, while Santander stopped selling PPI alongside unsecured credit in 2009 and is continuing to review the sale of it alongside mortgages.

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Banking which is "free if in credit" was only made possible by the charges levied when customers went into unauthorised overdraft, the Lords heard.

Those charges "will necessarily exceed by a large margin" the real cost to the bank of dealing with unarranged overdrafts because they were "essential to the funding of the whole current account system", said Jonathan Sumption QC, for Barclays.

Mr Sumption was opening an appeal by seven major banks and a building society against High Court and Court of Appeal decisions that the charges come under "unfair contract" rules and are therefore subject to regulation by the Office of Fair Trading.

A final ruling from the House of Lords against the banks would pave the way for further hearings to decide whether the charges are fair and, if not, what a fair charge would be.

The result is awaited by tens of thousands of customers whose refund claims have been frozen while the test case goes through the courts.

Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 or more for a single bounced payment. Campaigners claim the actual cost to the banks could be as little as £2.50.

If the banks ultimately lose the test case, it could cost them £2.6 billion a year in lost revenue and lead to their having to make refunds of up to £1 billion.

Before refund claims were frozen, some banks had already paid out more than £559 million to customers who complained about "rip-off" overdraft charges.

Members of the industry have warned that defeat in the House of Lords could lead to the end of free banking in the UK, with consumers having to pay a monthly fee or a fee for every transaction they carry out.

But many of the high street banks have already changed the structure of the fees they charge people who go into the red, with or without permission.

The test case to decide the legal issues thrown up by the dispute was brought jointly by the OFT and Abbey; Barclays; Clydesdale; Halifax Bank of Scotland and Lloyds TSB, which are now part of the same group; HSBC, Royal Bank of Scotland Group and Nationwide Building Society.

At the start of a three-day appeal hearing, Mr Sumption told Lords Phillips, Walker, Mance and Neuberger and Baroness Hale that free banking depended on the charges made when customers operated accounts which were not in credit or exceeded agreed overdraft limits.

This system of "cross-subsidy" existed in banks in many other countries, and in other service industries such as package holidays, mobile phone service provision, airlines and restaurants.

Mr Sumption argued that the terms of agreements between banks and their customers regarding overdraft charges were clearly expressed, but had been rendered "over-refined and over-complicated" by the earlier court decisions.

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Last month, the Court of Appeal agreed with the High Court's decision that charges can be subject to 'unfair contractual terms' laws. This marked a major victory for bank charge reclaimers as, provisionally, the Office of Fair Trading has suggested it thinks they are unfair.

Martin Lewis, creator of MoneySavingExpert.com, says: "It's time the banks gave up and paid out. Hundreds of thousands of people are waiting to get money back that's been unlawfully taken from their accounts, without their permission. Both the High Court and the Court of Appeal have already said bank charges are governed by fairness rules and the OFT has said it provisionally thinks charges are unfair."

"This is a supertanker and it's only heading in one direction. The banks can't stop it, but they're doing all they can to slow the process down. That's a shame as there's nothing the economy needs more right now than cash put into real people's pockets."

"While this means it's likely the FSA will extend its hold on reclaiming, that shouldn't stop people putting in their claims as soon as possible, to put them ahead in the queue. Plus for anyone in financial hardship the hold does not apply, and payouts of £1,000s are happening regularly."

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The Appeal Court is deciding only whether the Office of Fair Trading (OFT) has the power to assess the current terms and conditions for fairness. The court will not decide whether or not the charges are fair.

At least 65,000 people have had their claims for the return of overdraft charges frozen in the court system. The legal claims were halted in July 2007 by a general stay on overdraft cases, imposed by county court judges. The stay was part of a wider agreement to allow a High Court test case to decide if bank overdraft fees are fair.

A win for the OFT would allow it to assess the banks’ terms and conditions and decide what constituted a fair charge for entering into an unauthorised overdraft. It would also pave the way for consumers to claim money back from their banks. In April 2008 a judge found in favour of the OFT, allowing it to assess the banks’ terms and conditions for fairness.

The banks argue that the Unfair Terms in Consumer Contract Regulations legislation was designed to protect consumers. The British Bankers’ Association said this legislation stopped people “putting silly and unfair clauses into contracts" – such as a £1m penalty if you are late with one payment.

The Court of Appeal verdict will not be the end of the matter. Even if the Appeal Court sides with the OFT and concludes that overdraft charges can be assessed for fairness, there will be no decision on whether the fees are fair or not.

If the banks are unsuccessful in the Appeal Court, they have the option to take the appeal all the way to the House of Lords.

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The code will ensure that banks make customers aware of the best deals available and do not withdraw credit or other facilities without good reason. It will be policed by the Financial Services Authority (FSA), the City regulator.

Ministers have decided to intervene amid growing concern among consumers and small businesses that banks are behaving unfairly during the current financial downturn - despite many of them being bailed out with billions of pounds of taxpayers money.

Small businesses have complained that banks have suddenly increased fees or charges. Consumers have not benefited from interest rate cuts.

Although the code will stop short of ordering banks to cut rates in line with the Bank of England base rate, they will have to alert customers to any cheaper products available.

If banks continue to block access to cheap credit, the code may be strengthened to set the maximum interest margins that banks can levy for different products.

Currently, most banks sign up to an industry-wide voluntary code of conduct. However, Lord Mandelson, the Business Secretary, is concerned that anecdotal evidence suggests that individual branch managers may not be abiding to the code.

Therefore, the new legally-enforced code will be at the core of a new "Banking Reform Bill" to be announced in this Wednesday's Queen's Speech. The Bill will also contain measures to speed up and increase the compensation paid to savers in failing banks.

Speaking to Labour activists over the weekend, Gordon Brown pledged that there would be "new measures in the next few days" to force the banks to help consumers during the downturn. A Downing Street aide confirmed that the new legally-binding code of conduct was being studied.

The Government is thought to be particularly concerned about the decision of some banks to "unilaterally cancel" overdrafts, loans and credit cards, often without warning.

The new code may also set out safeguards for consumers who face having their homes repossessed. Alistair Darling, the Chancellor, recently said that banks should wait at least three months before launching repossession actions.

Ministers have been angered by the refusal of banks to increase lending levels again which has plunged small businesses into financial trouble. The Government has spent £37 billion buying stakes in several banks in an attempt to improve their financial position.

However, there are fears that the banks are simply storing the money and speeding up the repayment of outstanding loans to allow them to pay-off the Government investment. Banking insiders claim that Northern Rock, the state-owned bank, has dramatically reduced lending and thousands of their customers are now trying to obtain credit elsewhere.

David Cameron, the Conservative leader, has called on the Government to introduce a scheme underwriting loans made by the banks to small businesses. He believes this will kick-start the credit market.

Mr Darling indicated that he may have to plough more money into the economy as Britain struggles to cope with the impact of recession. Last week, the Chancellor announced a controversial £20 billion fiscal-stimulus package of tax cuts and increased public spending. However, the pre-Budget report, including a Vat cut which comes into effect today, has failed to win over voters.

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Exclusive research for The Daily Telegraph revealed some of Britain's best known lenders now charge up to £63 for exceeding an overdraft limit.

Campaigners criticized banks for deliberately making the fee structures more complicated to "hide" the increased charges and boost their profits.

It comes in advance of a ruling on "unfair" overdraft charges. The High Court ruled in April that the Office of Fair Trading could start investigating the fairness of overdraft fees for those who exceed their agreed limits.

Kevin Mountford, head of banking at moneysupermarket.com, said: "While there is a call to simplify overdraft fees, in particular unauthorised ones, the range of charges now applied by banks is in fact causing more confusion.
"Often consumers are oblivious to the amount they are paying and as such rarely challenge any charges made.

Banks can rely on this customer apathy to boost margins.

"In light of the OFT case, it is about time this situation was cleared up and greater transparency introduced."
Eddie Weatherill, the chairman of campaign group Independent Banking Advisory Service, said: "The banks have got very clever about hiding the charges.

"It is less transparent and almost impossible for customers to know how much their account will cost them."
The research - carried out by Moneysupermarket.com for The Daily Telegraph - showed the cost of going £100 overdrawn on an unauthorized basis for three days on a so-called "paid" item. This is when a payment is made by the customer and honoured by the bank.

It showed Abbey customers pay £10 more in charges today compared with 18 months ago on its two current account accounts called Preferred In-Credit Rate and Preferred Overdraft Rate. And Halifax customers with a High Interest Current Account pay £5 more today compared with April 2007, while the bank charges up to £63 for exceeding an overdraft limit.

However, not all bank accounts have seen charges increased. Barclays Bank Account customers pay £60 less today and Lloyds TSB customers with a Classic Plus Account pay £30 less today compared to 18 months ago, according to the findings.

The banking industry claims that unauthorised overdraft charges help fund "free banking" for all the customers that do not break overdraft limits. The banks argue that if they are forced to drop the charges, they may have to introduce fees for customers.

A spokesperson for Halifax, said: “We believe our unarranged overdraft charges are fair. We take every step we can to assist customers in managing their accounts and understanding the charges - this includes providing statement inserts, information on our websites and in branches.”

Explaining the changes to Abbey’s fees since September 2007, a spokesman for Abbey said: “We now have a tiered approach, which means that those customers that have small paid or unpaid items pay less. In our experience, items of under £35 make up over half of a typical customer’s paid items, and our estimates are that 70 per cent of our customers are better off as a result.”

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