In 2000 Natwest Bank joined the Royal Bank of Scotland Group in a deal worth £21 billion. The move helped Natwest seal its place as one of the UK’s four largest banks. Providing current accounts, loans mortgages, investment products and even home and car insurance the bank’s logo has become a familiar across the financial world. With the slogan ‘Helpful Banking’ Natwest’s boasts a more personal, traditional approach to banking, but the brand carefully crafted image has felt the strain in recent times during the emergence of the payment protection insurance scandal.
Figures released by The Financial Services Authority (FSA) show that Natwest Bank was the fourth most complained about UK bank in the second half of 2010. With 87,271 complaints it was just over 2,500 behind Lloyds TSB who came in third. The most complained about product in this period, with some 63% of the total number of complaints, was payment protection insurance.
Payment protection insurance is sold with mortgages, personal loans and credit cards and is meant to step in if a policy holder is unable to work because of redundancy, sickness or accident. The cover is extremely controversial, though, because of its high cost and the significant amount of exemptions. Added to this, following an exposé in 2006, many customers have realised they have been mis-sold the cover. As a consequence of these combined factors, PPI has risen to become The Financial ombudsman’s single most complained about product.
What has angered many victims of mis-selling more has been the seeming unwillingness of many lenders, including Natwest Bank, to handle complaints quickly and thoroughly. Many people feel they have been ‘fobbed-off’ and their complaints have been dismissed.
The unwillingness of banks to admit wrongdoing in the Payment protection affair becomes a little clearer when it is considered just how profitable the sale of this insurance can be. The industry as a whole brings in around £5.5 billion a year and is often more profitable than the interest earned from the loans and credit cards it is sold alongside. Added to this the rate of payouts for this kind of insurance is often very low. In June 2008 the Competition Commission released figures relating to the average payout of different kinds of insurance. A summary is below:
- Car Insurance – 79%
- Home Insurance – 54%
- Mortgage PPI – 28%
- Credit Card PPI – 11%
- Loan PPI – 15%
Many people find these figures shockingly low, but it begins to paint a picture of just what a cash cow PPI has been to lenders in the past. Whereas a car insurer would make £0.21 for every £1, sales of Credit Card Payment protection could make as much as £0.79!
In 2010 The FSA announced a new set of guidelines to more closely regulate the sale of PPI and help to prevent future cases of mis-selling. The British Banking Association was unhappy with the new rules; however, and requested a High Court review. Whilst the court’s decision was pending many banks, including Natwest, placed all customer claims on hold. For many customers this meant a four month wait for news regarding their complaint.
In April 2011, the High Court returned its verdict finding in favour of The FSA and The British Banking Association made the decision to not appeal the decision. As a result, lenders must now resume processing client complaints and must abide by the new FSA guidelines.
For many people the Court ruling was seen as a real turning point in the PPI scandal and it was hoped that lenders would finally fully accept the extent of PPI mis-selling and move to compensate customers. The early signs are promising as many banks have announced the allocation of funds to deal with customer claims. One of these banks is RBS who have allocated £850 million and it is hoped this can be regarded as good news for Natwest Bank customers who believe they have been mis-sold PPI. It is not known how many Natwest policies may have been mis-sold, but, including policies sold under the RBS brand, a total of between 1.6-2.4 million policies have been mis-sold meaning, potentially, many thousands of people may still be eligible to make a claim.
If you believe you have been mis-sold a policy by Natwest Bank or any other provider and you’d like to register to make a ppi reclaim call our team on 0207 471 2000.