Response to the Telegraph’s Kamal Ahmed about the ‘PPI Claims Gravy Train’

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Response to the Telegraph’s Kamal Ahmed about the ‘PPI Claims Gravy Train’

Hi Kamal,

I read your article with interest, a raised eyebrow and coffee all over my laptop (I was laughing). While I appreciate there’s nothing like a ride on the bandwagon, I feel a few of your comments might need qualifying. Let’s get to it…

“The PPI gravy train has long since sloshed past the point where it is about compensating those with legitimate grievances. It has become a money-making exercise, driven by claims companies hiding behind the mask of justice.”

For starters, just wondering if you have any evidence of claimants being compensated for illegitimate claims? And just to clarify I mean actual compensation payouts, not simply making illegitimate claims.

How do you think people feel? The mis sale of PPI was first raised in April 2001 by the Financial Ombudsman, a full 10 years before the court case. You say the gravy train has ‘sloshed past the point’, the banks were on the PPI gravy train first and now it’s costing them money they want to get off?

There are no doubt some unscrupulous claims management companies out there, every industry has it’s ‘undesirables’, but have you conducted any research into whether people prefer to claim alone or through a company? The latest figures from the FOS show that 75% of claims are brought via a claims management company, so if your beef is with claims companies making money from mis sold PPI, does that not show people prefer to let a company handle their claim?

In your article about Ocado you call the company entreprenurial and praise the business for almost making a profit. Ocado deliver food for customers who do not have the inclination to get it themselves or do not have the time. Customers pay for this service. Yet when this model is applied to the PPI industry you have a problem with it? Can i assume then that in the days between 1st and 8th Feb you had a change of heart about a company charging a customer for a service they could do themselves?

And if it is in some way inappropriate for a company to charge for such a service, surely the fact that 90% of houses are sold through an estate agent is in some way not right – after all, you can sell your house yourself if you want.

“It has become a money making exercise driven by claims companies hiding behind the mask of justice” – please – I know you work for a reputable defender of civil liberties and campaigner for freedom of information but isn’t that exactly what the best newspapers do: expose injustice for a daily fee? Last time i checked, your employer wasn’t a charity.

And what about Solicitors, Judges, MP’s? They all protect the people from injustice and take a wage home at the end of the month. I’m often wrong, but your problem seems to be with generally making money from justice and I agree – it’d be great if we could handle people’s claims for free if they don’t want to do it themselves.

People can get back their PPI payments themselves without paying a fee, but the fact that they prefer not to is keeping thousands of people in employment at a time when the country is in it’s lowest recession since 1929.

In a UK where PPI claims companies did not bring claims we can assume only £5 billion would have been refunded sp far, based on those FOS figures. Do we think banks would have refunded the other £5billion without being asked/forced to?

If you think there should be a limited liability for PPI claims, remember: the banks were offered a deadline but turned it down after the FCA said they’d only consider it if the banks poured money into a marketing and publicity campaign to build awareness.

“Like with whiplash fraud — where insurance companies find it cheaper to settle bogus car accident claims than fight them — banks have found it easier to pay out on all claims rather than fight the clearly erroneous ones.”

Do you have any evidence of this as i find it hard to believe that banks would reject 70% of PPI claims (FOS December 2013) and then pay out on non-ppi claims. In fact there are arrangements in place in the PPI industry from most banks to check if there’s PPI BEFORE a claim is made. The only bank to complain about erroneous claims is Government-backed Lloyds and they’re only major bank to not offer this arrangemetn to PPI claims comapnies.

If they had the arrangement in place then maybe they wouldn’t have to worry about these ‘speculative’ claims. You have to ask yourself: why is the bank with the largest number of claims and highest compensation pot not offering this service? It would save them time and money, the FOS time and money and claimants time – but they don’t do it.

 

http://www.financial-ombudsman.org.uk/publications/technical_notes/ppi/was-a-policy-sold.html

 

“When that collapsed, they swung to the other extreme — agreeing to settle all claims with very few checks. Banks would argue that they had to do that as they were already guilty in the court of public opinion.”

Now this one you can really help me out with because as as far as i’m aware only Barclays offered to refund claimants automatically and these were only people who had already made a claim BEFORE the April 2011 High COurt decision.

 

“The PPI scandal has been totally mishandled,” Davide Serra, the highly respected founder of the hedge fund Algebris told me this weekend.

“Yes, there were mis-selling cases but [the banks] should have immediately limited the liability. In my case I have people ringing me 10 times a week asking me to make a claim. It is an insult.

“People are gaming it and that is obvious. This process has done a disservice to the UK retail banking market and to citizens. It is a scandal and is morally disgusting.”

Mr Serra speaks sense.

Not sure what your point is here, you say Mr Serra makes sense saying there should be a limit on liabilty, but where does this figure come from? Is it arbitrary? A percentage? Natalie Ceeny, former chief Ombudsman, now head of custoemr service at HSBC, said that banks sold £50billion worth of PPI, so far we have only refunded 1/5th of that – £10billion – so liability-wise, the banks are nowhere near what they made from PPI.

You’re living in a world where the banks play fair i’m afraid, such as this:

– All banks tell you whether you have PPI or not

– You claim and if you were mis sold the bank simply refunds you

That’s not the way it works and you know it. Banks reject 70% of claims that then go on to be upheld by the FOS, that is to say that banks tell 70% of people they were not mis sold but they actually were. No that’s morally disgusting.

Lloyds actually trained staff to put people off claiming – do you blame people for trying to get their money back?

As for Mr Serra’s comment: “In my case I have people ringing me 10 times a week asking me to make a claim. It is an insult.” Get a grip, you’re involved. Get into bed with a bank and you have to deal with the flatulence. Not everyone can afford to have £2,750 taken off them (the average industry PPI refund) so if they think they may have been mis sold they’re going to be inerested in finding out oif they have been. As a hedge fund founder he of all people should understand that people want money if they can get it lawfully.

“Today, the total amount provisioned by the UK’s banks totals close to £20bn and many suspect there is more to come. Of that, 20pc is simply to administer the processing factories that claims management companies have set up and banks have been obliged to respond to.”

What are you talking about? You do know that claims companies handle people’s claim’s don’t you? There may well be a few rogue companies making up false claims – however this is very unbelieveable as to start a complaint you need meticulously accurate account details – but the overwhelming majority of claims (and you’ve got me here, i’m guessing) are brought by real people who have instructed a ppi claims company to handle the claim for them. We may be bringing the claim to the bank anf the FOS but it’s a real person’s claim who has decided to use us.

So, with that in mind a claim needs administering, maintaining and managing – especially when you you’re dealing with banks – and for those people who CHOOSE to use a claims company they do it fo them. The administrative cost is still there if you claim alone, it’s just the individual must absorb it in the form of time, effort and distraction – and here’s the most important bit – people are prepared to pay a company to do all of this for them.

REMEMBER: the banks don’t pay out any more on a claim that is handled by a claims management company. The customer pays it and they’re happy to because it saves them the hassle of doing it themselves. If you disagree with people choosing to spend money on a service, where does this leave your paper and the global economy?

 

“Lloyds alone employs 6,000 people assessing claims, more than half of which — an initial sifting process reveals — are from people who have never had a PPI policy.”

We’ve covered this one i think.

“It appears that any call to limit the liabilities will fall on deaf ears. Banks have little unity of purpose, with those less exposed to the PPI scandal reluctant to join forces with those floundering around in the mess.”

and this one, the FCA were prepared to discuss a deadline but the banks din’t want to hear it – or speak about it either it seems, but your paper did cover it.

 

“If there is not going to be action — and it seems unlikely there is — then let us at least call PPI compensation what it is: a money-making exercise which is out of all proportion to the original sin it is attempting to solve.”

LOL, sorry – unprofessional. I’ll let Mrs Ceeny deal with this one:

 

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/4/on-loan1.htm

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IMPORTANT:The last day we can accept a new claim is Friday 23rd August – midday – to ensure the paperwork is properly processed and lodged with your lender before the cut-off time.