The Royal Bank of Scotland has been in the news recently for, debatably, all the wrong reasons after emerging as one of the major lenders caught up in the Payment Protection. Given the amount of policies sold, estimated to be between 1.6 and 2.4 million, including those sold by Natwest, it is unsurprising RBS has been severely affected by the scandal.
The Payment Protection problem settles on the fact that many lenders, across the world of finance, mis-sold insurance policies to thousands, if not millions, of customers. The mis-selling occurred for a number of differences and including customers being given accurate or incomplete information as well as policies being sold to those who were unsuitable or would be ineligible to use the cover. The issue was brought to light by The Office of Fair Trading and The Financial Services in 2006 following numerous customer complaints. Their investigations found many lenders had provided inadequate training for staff and had failed to put in place suitable processes to protect their customers. Payment Protection had been sold widely, by RBS, and other lenders for as much as thirty years and had become a huge source of revenue for lenders. It is estimated that the sale of PPI brings in as much as £5.5 billion per year and had actually risen to become more profitable than the interest from the loans, mortgages and credit cards to which it was attached. Because of the profits involved many lenders offered large rates of commission and the product began to be sold widely alongside many different forms of credit. Sadly, this also led to a drop in the standard of selling.
As a result of The Financial Service Authority and Office of Fair Trading investigations several large lenders and many smaller providers were given fines. The investigations also led to a significant rise in the number of PPI claims.
RBS, Barclays, Lloyds and HSBC were collectively responsible for 51% of the 206,000 complaints reviewed by The Financial Ombudsman Service in 2010. The figure is a record for the ombudsman and highlights the sheer scale of the issue. As a consequence of these reviews many of those unhappy customers received PPI refunds creating significant losses for the banks. In 2010 The Financial Ombudsman Service investigated 11,000 PPI complaints concerning RBS PPI sales and found in favour of the customer in 70% of these cases.
The good news for customers who feel they have been mis-sold payment protection is RBS is one of the major lenders who has stepped forward to announce they have allocated funds to deal with customer complaints regarding the insurance. They have pledged £850 million in addition to the £200 million they have already paid out to customers.
The bad news is those expecting refunds may have to wait some time as RBS, like many banks, is encountering severe backlogs with pending claims. The Financial Services Authority (FSA) has announced it will allow lenders up to 16 weeks to examine and issue their final response to new claims. Under existing rules lenders are allowed a maximum of 8 weeks, but the FSA has acknowledged the pressure lenders are under to deal with the huge volume of complaints. The situation has been worsened by the fact many lenders chose to put claims on hold pending a High Court review of new FSA guidelines. The review was requested by The British Banking Association after lenders expressed concern that the new rules would force them to examine new PPI cases retrospectively. The High Court rejected the idea, though, and now lenders must proceed under the new guidelines. This is particularly good news for anyone with an older PPI policy and may even allow those who have already had claims rejected to request another review of their case.
If you believe you have been mis-sold loan insurance or credit card PPI you have the right to make a claim. We have already assisted more than 60,000 customers to make complaints. We aim to guide our customers through the whole process and resolve claims as quickly as possible. To start a claim or to speak to our of our team call us on 0207 471 2000.