| PPI Refund

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Since decades, Lloyds Banking Group has been a reputed name in the banking sector across the globe. It had been enjoying a great reputation in the banking sector, with immense customer support and a perennial brand loyalty. However, things started changing when the infamous PPI scandal came under great media and public scrutiny.

Payment Protection Insurance (PPI) was wrongly sold by several financial institutions to ignorant and innocent buyers in order to earn more commission without the knowledge of the customers. In majority of the cases, the customers were sold the policy without being told about it. As manipulative as it sounds, PPI has been sold to thousands of customers along with a loan or credit borrowed from a commercial bank. The policy is also infamous for being sold without mentioning certain important aspects, such as the payment procedure and the terms of commission. Factually, the policy doesn’t cover much as compared to the amount it costs, but it is sold in a way where the buyers would feel as if it is the best policy in the world!

Lloyds The Biggest Culprit of PPI Mis-selling

All this mess and manipulation led to a scandal which robbed off billions from the pockets of several innocent buyers in the country. As it all started to unfold, many famous banks and financial institutions were exposed and charged of mis-selling the policy. Out of these culprits, Lloyds has emerged as a mastermind. It has been charged with the maximum number of complaints regarding the mis-selling of PPI. When the policy was sold, the company often glorified certain clauses and completely avoided the ones regarding the payment details and the commission charged.

This continued for many years and when the scam was finally exposed, Lloyds owed a huge amount to their mis-sold customers. It started getting thousands of complaints which kept increasing over a period of time. Though the amount of complaints was steady and normal in the beginning, they started increasing exponentially. There came a time when the bank had to set aside a provision specially for paying back the PPI compensation. Till date, the total PPI provision set aside by Lloyds Banking Group has amounted to more than £18.1 billion.

Lloyds Paying a Big Price for PPI Blunders

Finally out of the state hands, the famous black horse has turned into what looks like another set of results, and still the analyst Ian Gordon showcased his opposition when he growled saying that while the numbers were nothing but another material beat, the bank’s one-offs are still frustrated. The banking business of the firm amounted to a profit of over £2.5 billion, which shows a 4% improvement over the first half of 2016, which was also the best number it has produced in years. However, the overall profit got slashed down by £1.6 billion this year after making a deduction for PPI provision. A huge chunk of the bank’s earnings had to be spent for PPI which could otherwise have been used for several productive purposes. This is precisely why all the commercial banks have been pushing the Financial Conduct Authority into bringing a deadline for making PPI claims.

It can be difficult to ascertain the weight of such a figure when it is merely staring at you from the screen. Let’s try and quantify it to understand the gravity of this situation. One of the big stories last year in health was the £2.45 billion worth of deficit run up by the Barts NHS Trust. Now, the amount of money that Lloyds Banking Group has spent on PPI issues would cover this gap more than seven times over! Also, this amount would buy the Government’s beloved trident nuclear missile system, with still decent change remaining for a few more toys! The amount is around fourteen times the size of Justine Greening’s £1.3 billion worth of educational bailout. An average Ocado customer would roughly put £108.45 in their shopping basket. The money spent by Lloyds for PPI could buy more than 166 million of them! Moreover, Lloyds could have bought 1.4 million brand new Ford Fiestas, 830,000 Ford Mondeos and 940,000 Ford Focuses. This should be sufficient to understand how much disastrous damage has been done to the bank by spending a fortune simply for making PPI repayments. Lloyds would definitely not have seen this coming, but it did deserve it after all the frauds.

Unrepentant Lloyds

However, Lloyd bankers are still in denial. They are still found arguing that they did nothing wrong in selling a financial product that was essentially worthless to majority of the people who bought it, including some senior bankers as well. This is not going to make the situation any better. The only way they can deal with the issue is by accepting the fault and doing as much as they can to make up for the same. Looking at this blunder, the customers have also been urged to make the banking system more efficient and regulated, as such a mishap may easily occur again if there is no change in the system.

Though PPI is not the only misconduct to affect the bank’s profits, it constitutes a large part of it. The complaints have been pouring in for years and the compensation amount is getting higher every passing year. With staggering billions to have already been spent and some amount still to be kept aside, it wouldn’t be incorrect to say that PPI has single-handedly drained the treasures of the bank. However, the only positive aspect here seems to be the attitude of the investors. Looking at this scenario, the first thought to strike anyone would be about the shareholders’ reaction. Are they not asking why is their money being wasted in billions? No, they surprisingly aren’t. In spite of the mess, the institutional investors simply shrug on being asked about this, and classify the conduct costs as ‘one-offs’ and use the word ‘historic’ about them.

After being charged for the PPI scandal, Lloyds has been doing great and progressing quickly. The only place where the institution is being held back is the issue of mis-sold PPI. It is difficult to say how long this would continue for, but it is certain that Lloyds paid its dues for being the most notorious in the lot!

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