This email was sent to Money Box subscribers on 25 February 2011

Dear Listener

Half a billion pounds – £500 million – is a large amount of money, even for a bank. This week Lloyds revealed that it had set aside that much to give compensation (my word) or redress (still my word) or ‘customer goodwill payments’ (its words) to an estimated 300,000 people. They had been sent mortgage offer documents containing a sentence which the bank admits ‘had the potential to cause confusion’.

 

The confusion was that the great majority of customers had no cap on their mortgage rate but the offer letter simply said “We have set a limit on the Halifax Standard Variable rate so it will not be more than 2% above Bank of England base rate.” Some customers not unreasonably thought that sentence meant there was a cap on their mortgage interest rate. But for the vast majority of them that was not true.

 

The bank says that 600,000 customers were sold mortgages by Halifax (now owned by Lloyds) between 20 September 2004 and 16 September 2007 and half of them were affected and will get compensation (sorry, a goodwill payment). Most will get the difference between the interest rate they were charged and what the capped rate would have been if it had applied to them which it didn’t and which, a spokeswoman told me, was ‘more clearly explained in the Terms and Conditions’. Another group who did not actually lose any money will get a flat-rate £250 payment. And the other 300,000 will get a letter of explanation.

 

There will be no fine imposed on Lloyds and no formal enforcement action by the Financial Services Authority – even though the mistake was identified during the FSA’s normal day to day supervisory work. The FSA claims the deal will enable customers to get their money more quickly. The deal also lets Lloyds to call them ‘customer goodwill payments’ rather than compensation or redress. But that can’t hide the hole in its annual profits – also reported this week – more than a fifth of the £2.2 billion it made in 2010.

 

***IN MONEY BOX THIS WEEK***

 

Risk. We talk to a woman who was put into a ‘predominantly lower risk investments and cash’ which lost her £27,000 even though she thought she had told her advisor she was very cautious. We look at what ‘risk’ means and how bad – or good – advisers and financial firms are at assessing it.

 

We look at three savings products which claim to protect you against inflation. But they come not so much with strings as steel hawsers.

 

Uninsured if you don’t travel, uninsured if you do. And yet you bought travel insurance…hmmm. The cost of booking a trip to a charming country that is now revolting.

 

Three banks have told us their profits for last year. We tease out the money they are making from us and ask are retail customers supporting the rest of their business?

 

We will squeeze this rich mixture until the pips squeak to force it into our 24 minute slot on Radio 4 which is live on Saturday just after noon. There’s no repeat this Sunday but you can listen any time via the podcast page www.bbc.co.uk/podcasts/series/moneybox. Check out our website www.bbc.co.uk/moneybox to follow links, download transcripts, send us stories or ideas you want us to look into and Have Your Say on.

 

This newsletter is available at bbc.co.uk/moneybox/newsletter shortly after it hits your inbox (tell your friends who don’t subscribe) and you can keep up with my random but timely thoughts on money 24 hours a day at www.twitter.com/paullewismoney.

 

On Wednesday I will be back to take your questions on Money Box Live at 3pm. This week the topic is the state pension – how to boost it, what you might get, and when you might finally catch up with the state pension age which is getting later by the month.

 

Best wishes,

 

Paul

 

PS don’t forget the programme trail on Breakfast on BBC One between 0845 and 0900 on Saturday. And I am back on Breakfast on Thursday at 0640ish and then answering emails from viewers at 0810ish.

 

 


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