It has emerged that Lloyds Banking Group (LBG) wrongly rejected 61,000 PPI claims after telling its customers they could find no records of an account with PPI attached.
The group has now changed its investigation procedures and is starting to pay compensation to affected customers, but no figure is available for the amount of money owed.
The admission came after a whistleblower revealed that LBG owed £770 million in compensation to 4.37 million people at the end of August.
This was said to be on top of the redress it is expected to pay for future successful PPI claims.
The group has already paid out more than £22 billion for PPI mis-selling and has earmarked another £1.8 billion for payouts
The bank, along with most of Britain’s top lenders, has admitted it was swamped with last minute claims in the weeks leading up to the claims deadline in August.
The Financial Conduct Authority (FCA) has warned that the banking industry has told them that so many new claims were lodged before the deadline that it could be summer 2020 before they have all been fully investigated.
The revelations came from leaked documents seen by the Mail On Sunday which showed LBG had received over a million complaints since the start of the year, but a spokesman refused to tell journalist Helen Cahill how many of them were new PPI claims.
Said Helen: “The leaked document identified a range of at least 19 outstanding problems at the end of August, including: botched affordability checks on loans, violated promises to freeze interest payments, wrongly rejecting PPI claims, failing to execute wills correctly, wrongly declaring customers were deceased and failing to link mortgage and home insurance payments made by the same customers.
Most severe failings
“Some of Lloyds’ most severe failings have hit its most vulnerable customers.
It was set to pay out £219million to 631,000 customers after debt collectors failed to make sure their debt repayments would be affordable.
“Lloyds also botched affordability checks on loans made to 857,922 customers, meaning it had to pay £174million in compensation.
And it continued charging interest to customers who had asked for a rate freeze because they had fallen into financial difficulties.
The bank had to pay £32million to 517,328 customers.”
An LBG spokesman said: “Undertaking a customer remediation is an exercise used by all banks to ensure fair outcomes for customers.
It means that if we make an error, we address it and learn from how it happened.
“We always establish if and how our customers have been affected and if they are impacted we ensure they are fully compensated where appropriate.
The vast majority of customers impacted by these have received letters and remediation.”