Lloyds seeks to charge for 'bogus' PPI claims

Deputy Business Editor

Friday 2 November 2012

LLOYDS Banking Group has called for claims management firms acting on behalf of consumers affected by payment protection insurance (PPI) mis-selling to pay an £850 fee if they submit "bogus or duplicate" applications.

DEFIANT: Chief executive Antonio Horta-Osorio is confident of progress in the future.

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GREIG CAMERON Deputy Business Editor

That came as Lloyds set aside a further £1 billion of PPI provisions – taking the total to just shy of £5.3bn – which pushed the bank to a pre-tax loss of £144 million in the third quarter of this year.

The quarterly figure means Lloyds is £583m in the red for the nine months to the end of September, although that is down from the almost £3.9 billion loss for the same period in 2011.Royal Bank of Scotland is expected to provide an additional £400m provision for PPI today.Lloyds chief executive Antonio Horta-Osorio believes Lloyds is making "significant progress" on its strategic plan.Yesterday, Matt Young, corporate affairs director, said up to 50% of the PPI claims Lloyds receives from claims management companies (CMC) have no merit. He said: "We have written to the ombudsman [to] ask them to consider whether CMCs should have to pay a fee if they supply bogus or erroneous claims."Mr Young said Lloyds pays a handling fee of £850 for administering each claim but remains committed to individuals being free to submit applications without payment.However, he added the bank has written to the Financial Ombudsman Service to suggest a change to the system. He said: "CMCs are sizeable organisations and if they supply erroneous claims they should meet the cost of that."The comments from the bank come just a few days after Natalie Ceeney, chief executive of the Financial Ombudsman Service, said one-quarter of PPI claims which had been dismissed had later turned out to be justified. Lloyds in response called for the ombudsman to share the data Ms Ceeney used to make the claim.Yesterday, the Ombudsman said only around 2.5% of all PPI cases it reviews were "frivolous and vexatious" and it did not charge a handling fee for those.George Culmer, finance director at Lloyds, said the bank paid around £250m a month for PPI compensation during the third quarter, down from a monthly bill of around £300m in the first six months of the year. He believes the downward trend will continue. Mr Horta-Osorio is also pleased with the direction Lloyds is heading as he restructures the business. He said: "We have made further significant progress this quarter, improving underlying performance in a challenging environment."Stripping out the cost of PPI, underlying profit doubled to £840m in the third quarter although underlying income dipped 7% to £4.6bn. Non-core assets have been cut by £30.7bn to £110bn in the first nine months of the year and it has exited from 12 countries. Bad debt provision was cut to £1.3bn, 35% down year-on-year, with reduced exposure to eurozone economies such as Portugal, Ireland, Italy, Spain and Greece.Mr Horta-Osorio confirmed the bank is on course to reduce costs to £10bn this year which would be two years ahead of the target initially set.However there was a further £150m provision in relation to litigation in Germany with the additional charge taking the total to £325m. The issue involves insurance policies issued by Clerical Medical Group and sold by intermediaries. The bank refused to comment on reports two traders have been suspended over the Libor rigging investigation.Richard Hunter, from Hargreaves Lansdown, said: "The simplification and focus of the business remains on track. On the downside, the full and final cost of PPI remains unknown, Lloyds is exposed to the stuttering economies of the UK and Ireland, while there is pressure on margins."Shares in Lloyds finished the day up 3.36p, or 8.28%, at 43.94p.

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Lloyds seeks to charge for 'bogus' PPI claims

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