PPI victims 'under-compensated'
Victims of the payment protection insurance mis-selling scandal could have potentially been under-compensated by an estimated £1 billion, a BBC News investigation has found.
Customers who may possibly have been affected had PPI on credit cards issued by Lloyds Banking Group, Barclays, MBNA and Capital One, the BBC said. All these banks claim to make every effort to pay the correct amount of compensation.
The estimated shortfall uncovered by the BBC arose because some fees and charges that were triggered by mis-sold PPI policies have been left out of compensation calculations, which also involve adding interest, thereby dramatically reducing the amounts some customers would have otherwise received.
It found the extent of this black hole difficult to assess, but it commissioned independent consultant Cliff D'Arcy, who spent 12 years as a banker working in the PPI industry, to estimate the overall size of the shortfall and how much banks would have to pay to make it good.
Mr D'Arcy told the BBC: "I'm confident that the figure will be somewhere in the region of a billion pounds of extra compensation."
His calculation was based on factors such as typical penalty charges on credit cards, how many credit card users had PPI, how many of those paid charges and what interest they had to pay.
The investigation said that in February, a man named Mark Pascoe was paid £5,800 of PPI compensation by credit card giant MBNA - but MBNA's calculations did not include just over £600 in fees and charges Mr Pascoe incurred since taking out his card in 1997.
According to the claims management company advising Mr Pascoe, had those fees been correctly included in the calculations, his compensation payout would have more than doubled to more than £13,000.
The Financial Ombudsman Service (FOS), which resolves disputes between consumers and financial firms, told the BBC that fees and charges triggered by mis-sold PPl premiums should be paid back.
Principal Ombudsman Caroline Wayman said: "If a fee is the result of the mis-sold PPI it should be given back, and if it's not included that would be a mistake."
Ms Wayman recommended that credit card customers who suspect their fees and charges were left out of their compensation calculations go back to their banks to ask what happened.
According to estimates by consumer group Which?, the total amount put aside across the industry so far to compensate people for PPI claims has reached £22.4 billion, making it by far the UK's biggest mis-selling scandal.
Such policies were often added to people's loans or credit cards without them realising, fully understanding what it was or needing such insurance.
Which? said that city regulator the Financial Conduct Authority (FCA) should investigate if any bank is found to have made systematic mistakes.
Which? executive director Richard Lloyd said: "It adds insult to injury to be mis-sold PPI and then not get paid the full compensation you are due.
" Banks must ensure that anyone with a legitimate PPI claim gets every penny they are entitled to."
A spokesman for the FCA said: " To date, the FCA's PPI redress programme has put close to £15 billion back into people's pockets.
"We are keeping a very close eye on how firms continue to handle complaints and where necessary will intervene - and have intervened - to ask them to do things differently to ensure consumers get a fair deal.
"Our starting point for all PPI complaints is that any consumer who has lost out as a result of mis-selling is entitled to claim redress.
"On the issue of over-limit fees, or other penalty fees or charges levied on a credit card which is covered by PPI: firms should refund these fees or charges if they arise as a result of the PPI mis-sale.
"But this is not a simple process. Firms must consider the individual circumstances of the claimant, for example whether it was the PPI or other expenditure that led to the penalty charge being incurred."
The spokesman said f irms should be preserving any records that help them handle complaints fairly, adding: "Generally speaking, given the high profile of PPI, we would be very surprised if firms were disposing of any PPI-related information."
In a statement to the BBC, Lloyds Banking Group said: "When a customer lets us know that they may have incurred other costs because of their PPI policy, we will investigate and make an appropriate refund."
Barclays acknowledged that it has previously operated a month-by-month assessment of whether PPI premiums had triggered additional fees which, they told the BBC, met the requirements of the regulations and was independently assured. Barclays told the BBC that it is now introducing a new, "enhanced" method.
MBNA told the BBC: "We are confident that our redress is correct, we have considered our methodology carefully and in detail. Our confidence is reinforced through external independent reviews."
Capital One said: "We aim to pay redress that puts the customer back in the position they would have been in if they had not had PPI."
:: The full report can be heard on BBC Radio 4's You And Yours programme at 12.00.