High St robbery

By RICHARD DYSON
Updated: 19:00 EST, 17 January 2004

SHAMELESS Lloyds TSB is at it again. It is flogging overpriced loan insurance to people who do not know they are buying it, do not want it and get no financial benefit from it. And, worst of all, the bank is forcing people to take on unaffordable debt to pay for these near-useless policies.

Financial Mail highlighted the case 13 months ago of unemployed Margaret Bowie, from Glasgow, who was duped by Lloyds salesmen into borrowing £1,060 at high interest to spend on a Lloyds' insurance policy.

It was designed to cover loan payments if a borrower became unemployed or fell ill. As Margaret had no job, the policy was practically worthless.

Despite our intervention, Lloyds refused to apologise to Margaret. Officials brazenly maintained - to the outrage of the independent insurance watchdog and Margaret's MP - that sales staff had offered 'good advice'.

Today, Financial Mail publishes evidence of more 'good advice' from Lloyds.

Anthony and Jane McMillan, a retired couple in their 60s, are, like Margaret, from Glasgow's Drumchapel district. They were in financial difficulty before they visited their local Lloyds branch.

But, thanks to Lloyds, their difficulties are now far worse.

Between July 2001 and September 2002, Lloyds encouraged the McMillans, whose sole income is state pension and a disability allowance, to borrow £8,300, much of it to repay other debts, including two expensive Lloyds credit cards.

Anthony said: 'Lloyds told me that to get the loan, we had to take the insurance. I did not see it at the time, but they were simply putting me in a worse mess.'

The McMillans only realised how shockingly Lloyds had treated them when they went to Gerald Benson, a debt counsellor at Drumchapel's Citizens Advice Bureau.

Like other debt counsellors attached to the bureau and similar charities, Gerald offers free, expert advice to borrowers in trouble. He also fights large companies for his clients - and knows Lloyds well. He has complained to the bank about many similar cases and believes there are thousands more victims of this type of mis-selling.

In the past year, he has sent six cases to the Financial Ombudsman for an independent ruling. Generally, he is proved right.

In the McMillans' case, the Ombudsman ordered Lloyds to repay the £1,993.61 premium, plus interest. The Ombudsman also took the unusual step of demanding that Lloyds pay additional compensation of £200.

Gerald has advised the McMillans to take the rebate but reject the compensation on the grounds that it is inadequate. He will now launch three court claims against Lloyds on behalf of the McMillans. If the bank allows the cases to reach court, a ruling against it would be hugely damaging.

Financial Mail contacted the watchdog General Insurance Standards Council about this case. It said: 'We are extremely concerned about these allegations and will begin inquiries immediately.'

Lloyds TSB's management has undergone massive changes in recent years, partly due to the string of mis-selling scandals that have engulfed it.

Phil Loney, the latest managing director of the general insurance division, said: 'We were trying to put the McMillans in a better position and we did reduce their monthly repayments.

'These insurance policies pay out more often for sickness or death than for unemployment. Since the McMillans bought their policy we have carried out a major overhaul of how these policies are sold and every customer should be clear on what they are buying.'

High-pressure lenders may be breaking the law

FINANCIAL Mail is urging people not to buy loan protection insurance - which is supposed to help borrowers if they lose their income through redundancy, illness or accident - from Lloyds.

We believe it is among the most expensive and inflexible around, and reckon the bank takes an exorbitant 50 to 80% cut as commission.

We are also worried about the quality of Lloyds' advice to borrowers. Its record on rogue sales practices is so poor - in all areas - that we have doubts about the promise made by Phil Loney that branch-level advice has improved.

If any bank salesman says that your loan is conditional on accepting a policy but does not spell out the cost of the cover, he is breaking the law. You should report the salesman by name and branch to the General Insurance Standards Council on 020 7648 7800.