Lloyds sets aside another £700m for PPI insurance claims

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Lloyds Banking Group has set aside another £1bn to cover the cost of insurance mis-selling and the treatment of mortgage customers.

Another £700m will cover payment protection insurance (PPI) claims and £283m will be used to repay about 590,000 mortgage holders.

The bank had already put away an extra £350m this year to cover PPI costs.

It came as Lloyds posted half-year pre-tax profits of £2.5bn, 4% higher than last year.

The results are the first since the government sold its stake in the bank.

The repayment to mortgage customers comes after they were charged from 2009 to 2016 for going into arrears.

The Financial Conduct Authority had been investigating the issue, concluding that the charges should not have been applied as the bank did not always do enough to understand customers’ circumstances and check that their arrears payment plans were affordable and sustainable.

The FCA says Lloyds will refund all fees charged for arrears management and broken payment arrangements, and it will also pay any litigation fees that were applied unfairly to customers who were involved in related legal action.

On top of that, it will also offer payments for potential distress and inconvenience.

The bank will itself approach customers to prompt them to make a claim.

Fraud probe

Lloyds became the UK’s biggest force in personal banking as a result of its absorption of HBOS – the former Halifax and Bank of Scotland – at the height of the financial crisis and was bailed out by the government at a cost of about £20bn.

Lloyds is also having to compensate some of its small business customers, who suffered as a result of widespread fraud at its former HBOS branch in Reading.

Victims saw their businesses taken over by so-called specialists recommended by the branch between the years 2003-07.

These “specialists” destroyed a number of the businesses, squandering the money they made on prostitutes and luxury holidays.

Lloyds is in the process of paying compensation to the victims of the fraud, for which it set aside £100m in the first quarter.

It is also currently undertaking a review of what happened.

Crisis legacy

It is the PPI mis-selling scandal, though, that dwarfs all others.

Lloyds has now increased provisions for claims some 17 times. Its chief financial officer, George Culmer, said it was “disappointing” to be having to do it again.

He also offered no guarantee that there would be no further increases in provisions, although he did say the number “looked appropriate in terms of covering us between now and August 2019”.

Lloyds alone has now set aside £18bn. In total, UK lenders have been forced to set aside more than £30bn to cover PPI compensation costs.

PPI became controversial after it was revealed that many customers had been sold it without understanding that the cost was being added to their loan repayments.

The bank’s chief executive, Antonio Horta-Osario, said of the various pots of money set aside for customer redress: “We have a commitment as a management team of putting these legacy charges behind us as soon as possible.”

He admitted, though, that there would “always be redress costs” when running a banking business.

‘Strength’

Laith Khalaf, senior analyst at stockbrokers Hargreaves Lansdown, said that despite the size of the provisions for the various types of misconduct, Lloyds’ performance was satisfactory.

“It’s a sign of Lloyds’ strength that it can shrug off £1.6bn of misconduct charges to post a strong rise in profits,” he said.

“Overall, this is a strong set of numbers from Lloyds, blighted, but not overshadowed, by misconduct costs. The government has exited the bank and is now no longer selling stock in the market, which removes a significant downward pressure on the share price.”

The government had been steadily offloading its Lloyds stake, resulting in about £21bn being returned to the taxpayer.

The government still owns 73% of Royal Bank of Scotland, which was rescu


‘Mini-tornado’ causes trail of destruction

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Wigan faced some of it most adverse weather conditions yesterday when residents came up against a tornado and a huge lightning storm. Yesterday afternoon the borough was hit by a mini-tornado, which swept through Hindley, destroying cars, trees and fence panels.

Residents in the Belmont Road area were disturbed by sudden high winds which left a trail of destruction. Firefighters were called out after a tree was uprooted and fell on a car in the Castle Hill Road area. And neighbours have reported a number of windows being broken and debris swept up and hurled through the air. Eyewitness Kirsty Roe, of Belmont Road, said: “There a number of windows which have been taken out and fences have been damaged.

“You can see where a tree has been ripped up and fallen on a car around the corner. “It was weird – there was an almighty bang and our windows started rattling.

“You could see a circle of dust and debris which had been whipped up.” A Greater Manchester Fire and Rescue Service spokesman confirmed that Hindley firefighters had been called out to deal with a tree which had fallen on a car in the Castle Hill Road area.

A Met Office spokesman said: “There is a chance that a tornado, may have struck in this location. “When people mention tornados they often think about large-scale events which can cause major damage.

“But there can be more localised, smaller events. The key factor will be whether the weather event makes contact with the ground. If it doesn’t, then it’s a funnel cloud, but if it does than it can be classified as a tornado.” At around 10pm last night, the borough was hit again, this time by a huge thunder and lightning storm which ripped through the sky for around 15 minutes.

Spectacular fork lightning lit up the night sky and the heavens opened in a dramatic turn in the weather. Thankfully firefighters have not reported attending to any more damage caused overnight.

 

 

 

 

 

 

 

 


Plans to ban leaseholds on new-build houses in England

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“Unfair charges” levied on buyers of new-build houses could be banned in England under a proposed crackdown.

Leaseholds on new-build houses would be outlawed, while ground rents could be dramatically reduced, under government plans subject to public consultation.

Ground rents can double every decade, crippling home owners and in some cases making a property impossible to sell.

“Enough is enough. These practices are unjust, unnecessary and need to stop,” said Communities Secretary Sajid Javid.

The proposals, which are subject to an eight-week consultation, apply only to England.

The leasehold system has existed for a long time in England and Wales, especially in blocks of flats.

Leaseholders own their homes for a fixed period of time, on a “lease” to a freeholder, but many have long leases, for example for many decades, and experience no problems.

Traditionally houses have nearly always been sold as freehold properties, meaning the buyer owns the building and land it is built on outright.

But the trend for new-build houses being sold as leasehold has accelerated in recent years.

Katie’s story: ‘My biggest mistake’

Katie Kendrick bought her new-build home from Bellway in Ellesmere Port, Cheshire, three years ago for £214,000.

“It’s the biggest mistake I’ve ever made,” she told the BBC.

Katie knew the house was leasehold – meaning she owned the property for the 150-year length of her lease agreement. But she claims she was told by the sales representative that because of the long lease it was “as good as freehold” – a property owned outright.

She thought nothing of it, and says she was told she would be able to buy her freehold after two years, believing it would cost between £2,000 and £4,000.

But a year and a half later, she received a letter from Bellway saying her freehold had been sold to an investment company, which was now quoting £13,300 for her to buy it.

What Bellway did – selling a new home as leasehold, and then selling the freehold separately to an investment company without informing the family living there – is not illegal.

The government said it was a particular problem in the north-west of England.

Leaseholders typically pay ground rent to the freeholder, but can be caught out by clauses allowing for dramatic increases in these fees, which come on top of management charges for the upkeep of communal areas.

The Department for Communities and Local Government (DCLG) said the terms of some leases “were becoming increasingly onerous”.

It cited examples of:

  • A homeowner being charged £1,500 by the freeholding company to make a small change to their family home
  • A family home which is now impossible to sell because the ground rent is expected to hit £10,000 a year by 2060
  • A homeowner who was told buying the lease would cost £2,000 but the bill came to £40,000

MPs have described the situation as a “national scandal” and the “PPI of the housebuilding industry”.

The DCLG said its proposals aimed to make future leases fairer by reducing ground rents so they “relate to real costs incurred”.

About 21% of private housing in England is owned by leaseholders, with 30% of those properties houses rather than flats, according to figures from the Department for Communities and Local Government.


Rise in personal loans dangerous, Bank of England official says

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A sharp rise in personal loans could pose a danger to the UK economy, a Bank of England official has warned.

Outstanding car loans, credit card balance transfers and personal loans have increased by 10% over the past year, the Bank’s financial stability director Alex Brazier said.

In contrast household incomes have risen by just 1.5%, he said.

“Household debt – like most things that are good in moderation – can be dangerous in excess”, Mr Brazier said.

Mr Brazier, in a speech to the University of Liverpool’s Institute for Risk and Uncertainty, added that this increase in debt was “dangerous to borrowers, lenders and, most importantly from our perspective, everyone else in the economy”.

He warned that High Street banks were at risk of entering “a spiral of complacency” about mounting consumer debt levels.

“Lending standards can go from responsible to reckless very quickly.

“The sorry fact is that as lenders think the risks they face are falling, the risks they – and the wider economy face – are actually growing,” Mr Brazier added.

Mr Brazier hinted that the Bank of England could force banks to take further safeguards against the risk of bad debts if it was deemed necessary.

Just last month, the Bank of England told banks to beef up their finances against the risk of bad loans.

They were told to set aside £11.4bn in the next 18 months in case future economic shocks meant some borrowers could not keep up their repayments.

Mr Brazier said by September the Bank will have assessed whether the rapid growth in consumer lending “has created any small gap in the line”.

“If it has, we’ll plug it,” said Mr Brazier.

In June, Bank of England governor Mark Carney said lenders appeared to have forgotten some of the lessons of the financial crisis.

Despite these concerns, Mr Carney stressed that the UK financial system was far stronger than at the time of the great banking crash in 2008-09.


MoneySuperMarket fined for sending seven million unwanted emails

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Price comparison website MoneySuperMarket has been fined £80,000 ($103,000) by the Information Commissioner’s Office for sending more than seven million emails to people who had opted out of receiving its communications.

The firm said it apologised “unreservedly”.

The emails regarded changes to the terms and conditions of the site.

However they also invited people to “reconsider” their opt-out.

Asking them to do this is against the law, said the ICO.

“Organisations can’t get around the law by sending direct marketing dressed up as legitimate updates,” said ICO enforcer Steve Eckersley in a statement.

“When people opt out of direct marketing, organisations must stop sending it, no questions asked, until such time as the consumer gives their consent. They don’t get a chance to persuade people to change their minds.”

MoneySuperMarket issued an apology.

“We take the protection of our customers’ data and privacy very seriously,” said a spokesman.

“We apologise unreservedly to the customers affected by this isolated incident and we have put measures in place to ensure it doesn’t happen again.”


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