In this occasional series of blogs, I recall some memorable cases which I have dealt with.
Mr D and Lloyds business loans
This is a classic case of mis-selling, showing how even a highly intelligent person can be led up the garden path by their bank.
Mr D was (and still is) an accountant, but was branching out into a secondary business with a partner. Lloyds provided financing and alongside it sold Business Protection Insurance; a product very much along the same lines as PPI.
The finances and partnership structure of the business were quite complex and I found the insurance would not actually have been of any benefit. It had, however, been made a condition of the business loan (and indeed two subsequent loans). I find this a lot. The insurance must be taken as part of the “package” but little heed is given as to its value to the business and its owners. Making the sale and generating revenue is what counts to the bank, not making sure their customer only pays for products they need.
It took Lloyds a long time to accept why its insurance was unsuitable as part of the lending package and then, to add insult to delay, it completely undervalued the amount of redress it should pay. This is not uncommon in complex cases. Banks tend to have standard redress formulas and will try to fit one of these to every case. It is not always appropriate, however, and bespoke calculations will often be needed to establish the correct amount of financial damage done and compensation required.
The lesson is:
- Don’t just accept the first offer that is made.
- Go the extra mile to fully understand the redress methodology and challenge it if necessary.