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Banks: Payment Protection Insurance

Volume 751: debated on Monday 13 January 2014


Asked by

To ask Her Majesty’s Government what plans they have to require all banks which have refunded payment protection insurance (PPI) monies to customers to send each such customer a statement, without charge, setting out how much money has been refunded under each of the three separate elements comprising a PPI payout.

My Lords, the Financial Conduct Authority requires banks to explain clearly to customers, free of charge, how their PPI redress offer has been calculated. The FCA is actively monitoring banks to ensure that they are complying with this requirement. If a bank has not provided this information, or it is not clearly presented, the consumer can bring a complaint against the bank and, if it is not resolved, raise a complaint with the Financial Ombudsman Service.

I thank the noble Lord for that Answer, but will he take it into account that the banks got off on the wrong foot with the repayment programme by refusing to write a letter to everybody telling them that they owed them some money? It was left to customers to initiate their own claim and there is no certainty that many have not slipped through the net. The noble Lord’s Answer does not allow for the possibility that there are a great many people out there who have no knowledge that a great deal of money is still owing to them.

My Lords, I can assure the noble Lord that the FCA is taking this matter seriously and I am sure that someone would be happy to meet him to discuss this in more detail. The FCA is already looking at this general area as part of the thematic review it is currently undertaking into PPI complaint handling.

My Lords, does my noble friend not agree that the breathtaking scale of the PPI scandal is matched only by the volume of telephone calls that have been received by many people throughout the country, offering to help, and taking a slice of the proceeds that are then obtained? Will the Government look into this to see whether another scandal is not under way?

My Lords, I think that all Members of your Lordships’ House will have had such telephone calls. I can reassure the noble Lord that the Government have acted in this area. During last year’s passage of the banking reform Act, we gave the claims management regulator the power to impose penalties on claims management companies which make speculative claims. We are also giving the regulator more enforcement staff and requiring claims management companies to pay for this extra effort.

My Lords, every call made in respect of PPI is not necessarily inappropriate. Some are. Many people have used claims management companies because they did not feel confident going through the process themselves. I accept that there has been abuse. The key thing we have done is to give the regulator power to crack down on firms which make speculative claims to the banks when there is no justification for it.

My Lords, the noble Lord has not answered the point made by the noble Lord, Lord James, which was that individuals have to apply to the banks for restitution of PPI claims rather than the banks recognising the obligation that they know they have. Why are the Government letting the banks off the hook?

My Lords, the Government are not letting the banks off the hook. The banks have paid out almost £13 billion in respect of PPI claims, which is about 70% of the total we think is payable, and a lot more claims are in the pipeline. The concern raised by the noble Lord in his Question relates primarily to the way in which the detailed amounts were calculated and the extent to which individuals can understand those calculations from the material that they receive from the banks.

My Lords, is not the problem around individual complaints that very often those people who do not claim are the most vulnerable?

My Lords, a great deal of publicity has been generated on this issue, and consumer organisations are looking at how they can do more. As I have said, a very considerable number of claims have already been made.

My Lords, the noble Lord will recall that in 2011 the chief executive of Barclays said that the period of remorse and apology should now be over. Since then we have had this scandal, described by the noble Lords, Lord James and Lord Wrigglesworth, as breathtaking and utterly unacceptable. We have Lloyds Bank, which is still being funded from the public purse, in the middle of it. Since 2011, we have had the rigging of LIBOR and we have had RBS, another publicly supported bank, handing out massive bonuses while declaring a pre-tax loss. When are the Government really going to get tough with the banks and make sure that the Vickers reforms are honoured in spirit and in practice?

I think that the noble Lord must have been somewhere else in recent months because I seem to remember spending many days over last autumn in your Lordships’ House putting through, under the banking reform Bill, the tougher new approval regime for senior bankers, instituting the new criminal offence of reckless misconduct and more generally looking at ways of vetting the suitability of bank staff to a greater extent. The legal framework within which the banks operate moving forward is substantially different from that in place when this Government came into office, and it will make it much more difficult, although not impossible, for many of the problems we have seen in the past to recur. It will be much easier for the regulators to take effective action if they think it is necessary to do so.

My Lords, it is not for the claimant to put his or her claim forward, but for the banks to justify the holding of moneys to which they are in no way entitled. If the banks know that to be the case, are they not deliberately withholding those funds from their rightful owners? If they do not know, although in most cases and with few exceptions they should know, that puts them constructively in a position of trust with regard to the holding of those moneys. Is not that the way to look at it?

My Lords, there is a certain amount in what the noble Lord says, but I repeat what I have said: there has been a huge amount of publicity around this issue and not only have a very considerable number of people made claims, but £12.9 billion has been paid out in respect of those claims.

When will my noble friend go a little further than Vickers and actually break up those banks that are too big to fail and seem also to be too big to manage?

My Lords, again this is something that we have debated at some length. The Government have taken effective steps to ring-fence retail banks and to make sure that a resolution position is in place so that if they get into difficulties, there is a prearranged way of dealing with that to ensure that the Government are not faced with the problems they had in 2008, when essentially all the banks which got into financial difficulties had to be propped up.