Lloyds, the taxpayer-backed banking group, has stopped processing complaints related to mis-sold payment protection insurance (PPI) policies, in defiance of an order by the Financial Services Authority.
The action by Lloyds, which is expected to be followed by other lenders, comes as the banking sector last week launched a judicial review against plans by the FSA to introduce tougher new rules for PPI complaints handling.
The FSA, which is contesting the British Bankers’ Association’s (BBA) judicial review, last week ordered banks to continue handling PPI claims while the legal challenge was underway.
But on Tuesday night Lloyds group, which includes Halifax and Lloyds TSB banks, confirmed it had changed its policy on handling PPI complaints since the judicial review had been launched.
“Complaints which are affected by the review are only being processed up to a point,” said a spokesperson for Lloyds Banking Group.
“We are seeking clarity from the FSA and the Financial Ombudsman Service on the judicial review and until this is received complaints may be delayed slightly.”
Lloyds did not say how many complaints have been put on hold. But the banking group, which no longer sells PPI, attracts the highest number of PPI complaints to the Financial Ombudsman Service.
In the six months to the end of June 2010 it was the subject of nearly 8,500 new general insurance disputes lodged with the ombudsman, the bulk of those PPI related.
PPI is designed to cover loan repayments for unsecured debts in the event of accident sickness or forced redundancy. However, since the FSA took on regulation of PPI in 2005 it has taken enforcement action against 24 firms largely for mis-selling.
In the last five years there have been more than 1m complaints made to firms about PPI. In 2009/2010 alone, customers referred 49,196 complaints to the Ombudsman which then upheld nine out of ten in the complainant’s favour.
The FSA said it “strongly” believed that a package of new complaint handling measures, announced last year, was a “sensible and fair solution” for consumers and the industry alike.
The FSA would not discuss Lloyds actions but said: “We repeat that firms are expected to continue handling complaints while the judicial process is ongoing customers,” said the FSA.
“Customers who are unhappy with the way their complaint has been dealt with can take their cases to the Ombudsman.”
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