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.
She said: ‘Was there mis-selling? Absolutely and whenever we found an example… we undertook a rectification exercise. It wasn’t always a misunderstanding. There were different types of mis-sellings but a large part was misunderstanding.’
‘We should have done better.’
When asked by Phillips if Sergeant accepted any responsibility for the mis-selling of PPI, she said: ‘I feel I bear accountability for not taking up with the FSA more clearly at the outset what principle’s based-regulation meant in the conduct area.
‘I made the wrong assumption, because it worked in other parts of the forest that we would know how it would work and as time goes on by continuing to address the various issues that were coming out of thematic reports I thought that this [mis-selling problem] could be mended.’