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Monday, March 26, 2012

How Have the Major Banks Reacted to the PPI Scandal?

By John Burton


The repercussions of the PPI scandal for banks still aren't over, and they've already caused major losses in profits across the board this year. The issue has snowballed ever since it was revealed in 2005 by the Citizen's Advice Bureau that customers were being seriously mistreated by banks in the selling of these policies.

If you're not clear on exactly what you're claiming for, it helps to have an overview of what PPI is. It should be an insurance policy attached to a mortgage which ensures that if you're in a situation where you're suddenly made unemployed, you don't have to worry about making payments to keep the mortgage. The issue with this was that people weren't getting a fair deal from UK banks. Only 15% of all money paid into these policies was ever paid out, and an awful lot of people were misled or simply forced into taking out PPI as a condition for being given a mortgage.

The reactions of banks to being exposed on this issue were different across the major providers, but most resisted calls for compensation at first. The exception to this was Santander, who own Alliance and Leister, Abby and Bradford and Bingly. Alliance in particular was heavily fined right when the scandal broke for particularly devious selling practices, and that seemed to cause Santander to see the writing on the wall. They immediately began processing claims and getting peoples' money back to them.

In contrast, Lloyds, Barclays and The Bank of Scotland resisted the ruling that they should pay compensation in court. They claimed that it was unfair to pay compensation retrospectively, because of a government rule change. This nicely sidestepped the fact that the rule was brought in because they were misleading customers in a form of protection racket, which is a serious crime in itself.

Despite over six years of people fighting for their money back there's still an awful lot to repay, so make sure you weren't a victim too.




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