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Lloyds comes under fire for PPI fraud

The Lloyds Banking Group has been forced to respond to allegations that contractors employed by the organisation were encouraged to turn a blind eye to fraud involving customers' payment protection insurance (PPI) claims.

A reporter from the Times discovered that staff at the company's PPI complaint handling centre at Royal Mint Court in London were told to overlook alterations made to people's loan agreements in order to prevent the firm from having to pay compensation to those who were mis-sold the insurance.

It was hoped that customers would lose heart and give up on their claims once they had been rejected for the first time.

A statement released by Lloyds said it had been made aware of the issues surrounding its PPI complaints procedures. The bank also refuted some of the comments made by trainers to the Times reporter.

"This site was operated for us by a third party supplier, Deloitte. Following further investigations we took immediate action, and in May concluded our contract with Deloitte and moved to a new supplier," the statement read.

In February 2013, the Financial Services Authority fined three firms owned by Lloyds a total of £4.3 million ($6.6 million) for delaying PPI payouts.

By Claire Archer