Mis-sold insurance set to cost Lloyds extra £1.8bn

LLOYDS is to set aside a further £1.8bn to compensate customers who were mis-sold insurance while seven million people who were mis-sold cover for credit cards through York-based firm CPP can begin making claims later this month as part of a £1.3bn compensation scheme.

The news from Lloyds means that its bill for mis-sold insurance has spiralled to nearly £10bn after the taxpayer-backed bank admitted it is set for another 550,000 complaints.

The bank’s new provision on payment protection insurance (PPI) is far higher than the additional £465m revealed last week by fellow state-backed player Royal Bank of Scotland, a move which took its current total to £3.1bn.

The bill for the whole industry is now in excess of £20bn.

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Lloyds set aside £3bn in 2013, despite a reduction in average monthly complaint volumes to around 37,000 in the final quarter of last year.

However, its latest customer surveys suggest that the Halifax and Bank of Scotland owner can expect another 550,000 complaints on PPI, while it has also revised its forecasts for those claims deemed successful.

Richard Hunter, the head of equities at Hargreaves Lansdown stockbrokers, said: “The PPI number is disappointing not only in terms of the cumulative figure now nudging £10bn, but also because it perpetuates concerns around when this saga will actually come to an end.”

Lloyds sought to highlight its return to health yesterday by forecasting a small profit in full-year results on February 13 and offering guidance on the steps it is taking towards dividend payments and the sale of the Government’s stake.

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Yesterday the Financial Conduct Authority (FCA) told CPP customers that they will begin receiving claims forms this month with the first pay-outs expected from late March.

Forms must be returned by August 30, after which claims will not be considered.

The level of redress per person will depend on the length of the time they had the products. The scheme covers sales and renewals back to January 2005. The FCA said customers do not need to use the services of a claims management company or law firm to complete claims forms,

The director of supervision, Clive Adamson, said: “If you believe you were mis-sold one of these protection products, fill out and return the claim form to make sure you get your money back. Don’t put it off till the last minute.”

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The scheme was given the green light last month after CPP customers overwhelmingly voted in favour, and it was later approved by the High Court.

CPP and 13 high street banks – through which the insurance was sold – agreed to a package that will see affected policy holders receive between £100 and £300 each. CPP was fined £10.5m in November 2012.