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Ex-Lloyds bosses defend PPI sales and shift blame to FSA

by Michelle Abrego on Jan 22, 2013 at 07:58

Ex-Lloyds bosses defend PPI sales and shift blame to FSA

Former Lloyds risk and retail bosses have defended the bank over its sales of Payment Protection Insurance (PPI) blaming poor communication with the Financial Services Authority (FSA), misunderstandings, and arguing that in some cases the product met customers' needs.

Ex-Lloyds chief risk officer Carol Sergeant said the bank was under was ‘intense scrutiny’ by the FSA from 2005 to 2008 but the regulator did not raise specific issues about the sale of PPI during that time.

Lloyds was later referred to enforcement and has so far paid out £5.3 billion in PPI compensation.

Giving evidence to the Parliamentary Commission on Banking Standards sub-committee on mis-selling and cross-selling Sergeant said there was a misunderstanding of rules during the relevant period and there should have been better dialogue between Lloyds and the FSA over what the rules actually meant.

‘It was a continuous period of improvement—with the benefit of hindsight—we should have had more deep conversations with the FSA about how they would implement the principles in practice,’ she said.

According to former principal of retail distribution and chief financial officer for Lloyds Banking Group, Helen Weir, there was confusion over how much of the advice had to be evidenced.

The panel’s lawyer, QC Rory Phillips asked why, with all the FSA scrutiny and external audits Lloyds continued to sell PPI if it was not for the purpose of profitability.

The total PPI income, net of claims, for 2002 to 2006 was £3.3 billion, said Phillips.

Weir said: ‘It is very important point we want to make, we believed it’s a good product that met customer needs. I still believe it meets some consumer’s needs.’

Weir admitted that the bank did mis-sell PPI but a lot of it came down to misunderstanding.

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17 comments so far. Why not have your say?

jimmy via mobile

Jan 22, 2013 at 09:21

Helen Weir is totally aware and should take full responsibly for her and her Branches actions during her period on the helm.

She made a point of working very closely with her Branches.

It was well known that staff were worked out of the bank if they weren't selling PPI with a loan. There were pre briefs and mid briefs with the sellers and Branch Manager to ensure PPI was sold.

There was an awareness that this practice was taking place at all levels of the bank.

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Jan 22, 2013 at 09:25

arguing that in 'some' cases the product met customers' needs.

its a numbers game!

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complacency rules

Jan 22, 2013 at 09:26

What absolute claptrap. It is admitted that Lloyds were mis-selling they do not need and did not need a Regulator to tell them that. Of course the regulator should have picked it up and stopped them, but they should not have been doing it in the first place. Just becasue the regulator was incompetent does not make Lloyds actions acceptable ot even understandable.

Clutching at straws!

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David Craik

Jan 22, 2013 at 09:42

Again, the FSA has failed. Again, they have the benefit of hindsight. Again, they get away with it. - Why?

Maybe Lloyds should have offered £4 or 5m p.a. to get a compliance knight!

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Belmarsh Solitary

Jan 22, 2013 at 09:59

will Barclays make the same claims? Another conflict of interest for the repulsive Sants!

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Charles Rickards

Jan 22, 2013 at 10:54

The Banks saw PPI sales as another income stream and targetted sales based on that and not on what was best for consumers. As a side effect of that, some consumers purchased what would have turned out to be a valuable product that would have provided benefits. The banks were and still are at fault for targetting sales of certain products or services. However, commercial reality has to be considered, as salaries have to be paid out of profitable turnover for a business to survive.

The FSA have failed to regulate effectively as they have not provided clear and unambiguous rules. In addition, they have often applied retrospective rules/guidance that was not present at the time of sales taking place.

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Is it ME!

Jan 22, 2013 at 10:56

Would it not be cheaper to put the budget for the FSA into legal aide and let the market sort itself out. Then put a big push on "buyer beware" and the use of plain English on contract literature.

The more we seem to spend on Compliance - the more complicated the literature , processes and the customer journey. One thing is certain the current environment is fatally flawed and just re-branding the FSA will solve nothing.

Insurance needs to be part of the cultural education of the general public, in other countries people are sold and buy protection because they want the benefits of the coverf and peace of mind. In the UK we seem to have a public view that insurance is something that is a waste of money - views that seem to be re-inforced by negative press - yet we all seem to value the bank compensation schemes!

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Ian Lees

Jan 22, 2013 at 11:00

Was Helen Weir not provided with an extraordinarily high salary plus bonuses and a massive pension fund - to be in charge and entirely repsonsible for her underlings ? I thought that was why they ( the shareholders ) paid her so much ?

Given the poor quality of " communication with clients ", it is not surprising that Lloyds had " poor communication with the FSA - and Sir Hector Sants". I have alerted ( George Culmer - Finance Director of LloydsTSB - and employees to people using my bank account to purchase i tunes - i.e Fraud. Neither George nor the untrained employees in the Chief executives office - will deal with this - or stop payments ( Obviously the LloydsTSB wish to charge me interest and further charges from LloydsTSB - the tardy savings bank - and now a fraudulent bank ). Ithought the directors would take repsonsibility for their failures - given their cash bonuses salaries and pensin contributions - under the FSA - clearly not !

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Usually found sitting on the fence

Jan 22, 2013 at 11:04

@ complacency rules - unless you bought PPI and later made a claim against it, I am aware of friends and family that have made successful claims. So not all were sold erroneously.

@ Barman - Quite true, however the tactic to sell it may have been crude and staff may have been under immense pressure to sell, but the customer did not have to sign up to it. I know, as I declined it on the occasions that I needed to take out a loan.

@ jimmy - By all means the bank needs to be held to account for their practices and the way they went about it so aggressively, however, customers did have a choice. The biggest crime is that the banks failed to record, document and protect themselves. They encouraged staff to flog PPI even in cases where the cover was effectively worthless (although I do wonder if all staff realised the protection was not worth the paper it was written on). As many of the claimants were probably well aware of the cost, the fact that it was not compulsory and the implications of taking/not taking it up.

@ David Craik - The FSA failed, sad, but true. It does make you wonder what disaster they would have to have overseen for them to incur some form of sanction?

@ All - as an individual that never took up a PPI policy, who knows those that did and needed it, my frustration is born from the volume of emails, texts and calls I get about the PPI I was mis-sold and how they can recover the money for xx% of the "win". Personally I would lock up all the banking execs who chose to fight it rather than take it on the chin, review all cases and make good where the information was lacking, where the client would never be able to make a claim and where there is doubt over the validity of the sell. They should not have been allowed to wait for clients to make a claim and the FSA or Govt should have insisted that banks and clients work solely together and not through a third party... sorry, rant over!!

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Jan 22, 2013 at 11:21

@UFSONTF - you and me both, but there were widely discussed cases where customers were told that they had to take the PPI in order to get the loan. I agree that individual sellers should not bear the blame, it should sit with the senior management.

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Mal L

Jan 22, 2013 at 11:25

@"usually" last paragraph -

good point, after all we had to do it that way in the Pensions and FSAVC reviews - I well remember the "Have you been Mis-sold" envelopes we had to use...............

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Ian Lees

Jan 22, 2013 at 11:32

Bringing facts to the forefront - should not be considered " a rant". Secondly it is usually Directors of these companies - who sit on the fence - not just becasue of their negligence or lack of copmpetence - but because they enjoy the sensation !

Why is it that those who fiddled the figures, massaged or manipulated the information - whether investment growth on endowments or pensions - and deliberately deceived consumers - by making false claims - based on spurious " investment returns", - have not been tried or tested in any Court of Law ? Why is it that those involved with pensions insolvency or where assets were less than their liabilities - have not been tried in any Court of Law ? This is peoples life savings these Directors and their stratagies have effectively stolen. These financial institutions employ " Economists " to assist them prepare for the future e.g Alex Salmond ex RBS Chief Economist . These financial institions employ hoards of Accountnants and Lawyers . These financial instituions employ Actuaries - who are unexciting and clearly flawed in their positions and who I believe should be publicly flogged - ( especially those at Equitable Life - the Pension Fund destroyers ) but they would probably enjoy that form of entertainment - in their miserable lives - in place of their sums that do not add up !

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James Clancy

Jan 22, 2013 at 11:52

Interesting piece in the independent


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Ian Lees

Jan 22, 2013 at 12:16

This is ex TSB employee Ms Seargent and Dr Stewart Ritchie ( ex Aegon / Scot Eq ) - two edinburgh companies who have a desire to find a " new product ", which can be sold by financial institutions - perhaps using With Profits to cover up charges or Unitised with profits to cover up commissions or.. . . There are already many simple products - such as deposit accounts - although I agree " instant access" accounts such as Nationwide Flexaccount are misleading as they " are a lie !" , they are restricted ( like the advice of their advisers ) and you require a VISA card to gain access to your own money - as Graeme Beale trusts his employees less than he trusts his cusotmers ( mutual or otherwise ). Nationwide is an address book for insurance companies who wish to flog their products ( often with high charges ) - and it appears the majority of Directors are from other financial institutions - who wish to climb aboard the Nationwide - gravy train, but with no service to those remaining "mutual", holders .

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Super Moses via mobile

Jan 22, 2013 at 20:38

I had the honour of working for Lloyds at one time and NEVER mis-sold PPI on a loan. All my clients were aware of what they were buying and were eligible to claim. However, some of the high fliers in my area were quite proud to tuck someone up with PPI whether the clients knew it or not. In my experience, it was 100% down to the seller and not the manager. The training was very clear....PPI should only be sold if appropriate. I also worked briefly for a sub prime lender and they were the real crooks. High pressure selling regardless of suitability. Disgusting

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Usually found sitting on the fence

Jan 23, 2013 at 10:17

@ Super Moses - While your statement is partially true, it is down to the seller, but it is the Manager's role to monitor and control the seller's activities. If the problem was genuinely as big as the money put aside to compensate, then the Management failed to address the problem. But I am equally a great believer in the buyer taking their fair share of responsibility... As I would imagine a number of the suitable clients you sold PPI to have made a claim, and "won"!!

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complacency rules

Jan 23, 2013 at 15:26

@ Usually found sitting on the fence

I agree.

Controls in a large organisation come from the very top through an hierarchical system of directors, Senior Managers etc.

Even in a well controlled organisation some staff will contraven the rules and it is not always the Managers ( no matter where on the chain they are) who are at fault.

The extent of the failures on PPI running into billions for each bank are a clear indication that the mis-selling was not down to one or two rogue staff but that it was the result of bank policy. The rogue staff in this instance seem to be those who sold PPI responsibly. However, if they are now taking the high moral ground now I do have to ask why they did not 'blow the whistle'.

Of course the buyer should be wary but financial products can be complex ( to the layman and also to the qualified adviser) which is why there is a whole system of regulation in place and why Banks should have acted ethically and sold PPI responsibly.

There seem to have been a number of articles in the financial press recently which seem to be suggesting that Bankers are being given a rather harsh time and that we should be moving on. Is this part of an orchestrated movement trying to reintegrate them into society? Lets get the messes cleared up, prosecute those who broke the law, claim back the bonuses from them who have benefited from all these misdemeanours, change the culture within the banks, pay back all the Governement support they have had, get dividends exceeding bonueses then we can move forward.

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