Lloyds Banking Group has added another £750m to its payment protection insurance compensation pot amid a slower-than-expected fall in complaints. (Photo: Reuters)
Lloyds Banking Group has added another £750m to its payment protection insurance compensation pot amid a slower-than-expected fall in complaints.
According to the group's fthird quarter interim management statement, Lloyds revealed the total amount it has set aside for PPI compensation has reached £8bn (€9.3bn, $12.9bn), as it fights to tackle the flood of complaints.
"PPI complaint volumes have continued to decline, albeit at a slower than expected rate, while response rates to proactive mailing were higher than forecast," said the bank, which is 42% owned by the state, in a statement.
Lloyds said average monthly complaint volumes were down 8% in the quarter and weekly complaints averaged approximately 11,000 in the third quarter of 2013, compared to approximately 12,500 in the second quarter.
Monthly complaint volumes were on average 55% below those in the third quarter of 2012.
Counting the Costs
The costs in the three months to September 2013 continued to be higher than the bank projected, reflecting the acceleration of cases with the Financial Ombudsman Service, higher reactive volumes, as well as an increased scope of proactive mailings combined with higher response rates.
"The average uphold rates have continued to trend upwards since early 2013," said the bank.
"The total amount provided for PPI represents our best estimate of likely costs and a number of risks and uncertainties remain, in particular complaint volumes, uphold rates, average redress costs and the outcome of the Financial Conduct Authority (FCA) Enforcement Team investigation.
"The cost of these factors could differ materially from our estimates, which could result in a further provision being required".
As at 30 September 2013, Lloyds said £1.7bn of the total PPI provision remained "unutilised", and total costs incurred in the three months to 30 September 2013 were £706m, including £161m of administration costs.
Banks have so far set aside £17bn, if you include Lloyds and the Cooperative Bank's new compensation injection, to deal with mis-sold PPI.
It has become the most expensive consumer scandal in British history.
PPI was originally designed to provide loan repayment cover, should the customer fall ill, lose their job or have an accident.
However, millions of customers complained because they never wanted or needed the policy in the first place.
According to Financial Conduct Authority data, the issue of PPI raked in the most complaints for banks between January and June 2013.
Some 1,786,626 complaints were opened during this period and PPI accounted for 61% of new complaints.
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