MANCHESTER – The boss of Britain's biggest retail bank struck a chord with the public when he complained of getting unsolicited calls from claims management firms promising him compensation from his own and other banks.
But while people share his irritation with calls and text messages about fantastic sums from claims they have not made, more and more are turning to claims management firms to help return billions tricked or bullied from them by the banks.
Facing a huge backlog of claims from the biggest mis-selling scandal in British banking history, the country's lenders are beginning to turn to claims firms for help themselves, instead of treating them as enemies.
It is a far cry from last year, when Lloyds' Chief Executive Antonio Horta-Osorio summed up the mood of many bankers by accusing the firms of fueling bogus claims, pointing to the irony of their calls to his own phone.
Horta-Osorio said one in four cases from firms claiming compensation for unwanted or unsuitable payment protection insurance (PPI) -- meant to protect borrowers who lost jobs or became ill -- did not even have a PPI with Lloyds.
"We have to stop this," he said. "It's fraud."
The tables were turned by figures from the country's Financial Ombudsman Service showing that Lloyds lost 98 percent of cases referred to the service in the year to March 2012, the worst record of any bank, compared with just 18 percent at Britain's biggest building society, Nationwide.
Now claims firms report a more cooperative atmosphere as the banks, which face a bill likely to far exceed the 12 billion pounds ($19 billion) they have already set aside, seek to save costs and restore their battered reputations.
Craig Lowther, founder of claims company Money Boomerang, said it had been approached by several banks looking to speed up the process of dealing with claims and avoid the extra cost of referrals to the Financial Ombudsman Service.
"We're starting to see some lenders approaching us with the idea of working in a smarter way," Lowther, 41, said in an interview at Money Boomerang's offices in Manchester, England.
PPI is by far the most costly of a string of scandals to have hit Britain's banks, including interest rate rigging, breaches of anti-money laundering requirements and the mis-sale of complex interest rate hedging products to small firms.
One senior bank executive told Reuters he expected a total bill for the industry of 25 billion pounds for mis-sold PPI, while the Bank of England has said up to 10 billion pounds more may need to be set aside on top of current provisions.
The claims industry has grown around this honey pot, attracting criticism not just for the aggressive marketing, but for taking big slices of compensation from people who could keep it all if they complained directly to their banks.
Under the new arrangements, Lowther said his company fast-tracks its strongest cases to lenders and flags up unresolved cases it is about to refer to the Ombudsman in a "search-and-destroy" process that also sees it dumping illegitimate claims.
This helps banks cut back processing costs and avoid the 900 pounds ($1,400) they are charged when cases are referred. With each billion pounds paid out in PPI cutting the amount banks can lend in real terms by 10 billion pounds, speeding up payments also helps end investor uncertainty over the impact of the bill.
Lowther said one bank, which he declined to name, had entered similar arrangements with around a dozen claims firms.
Several major banks contacted by Reuters all stressed they dealt with all claims equally and at the same pace.
Declining to be quoted by name, one said it was prepared to work with reputable claims firms to process legitimate claims quickly but was wary of unscrupulous operators. Another said it had "stepped up its engagement" with claims firms in the past 12 months because of a "very significant" increase in complaints.
PPI is the most complained about product ever in Britain, with the Ombudsman receiving its 500,000th case last October. The second highest is mortgage "endowment" insurance policies, about which 350,000 complaints have reached the Ombudsman.
Lloyds opened the floodgates to a wave of claims when it set aside 3.2 billion pounds for PPI compensation payouts in May 2011, after Britain's banks had lost a landmark court case.
Lloyds, which has an army of 6,000 processing claims, has increased the amount to 5.3 billion, the highest in the industry, and analysts expect there is more to come.
It says it deals with all complaints at the same speed, acknowledging it had problems distributing compensation payments to customers at the end of 2011.
"We are confident that more current data will highlight the significant investment we have made in our PPI complaints handling processes," a Lloyds spokesman said.
The Justice Ministry, which regulates more than 3,000 claims management firms in the UK, says the industry does not always live up to the image it projects of consumer champion.
"Too often consumers are treated simply as a commodity and their claims for mis-sold products and the like are presented to lenders in a commoditized format," the Justice Ministry's Claims Management Regulation Unit said in its annual report.
It said firms handling PPI claims increased their turnover by 66 percent to 313 million pounds in the year to March 31, 2012, a number thought to have grown significantly since.
On Thursday, the ombudsman said it was taking on 1,000 new staff to deal with an unprecedented level of complaints; last year it said they had reached up to 400 an hour.
Money Boomerang, which takes a hefty 25 percent slice of compensation payments, rejected accusations that firms like his are to blame for the spiraling cost of compensation.
"To say that it's all the fault of big bad claims management companies is a misnomer," said Lowther who previously provided legal services to ex-miners who had contracted illnesses.
"They (the banks) created the mess and they haven't done a good job of clearing up the mess."
The ombudsman has said that less than 4 percent of the claims it dealt with were thrown out because the customer did not have a PPI agreement with the lender.
It ruled in favor of the consumer in more than four out of five of the remaining cases and said there was no difference in the uphold rate between claims brought by individuals and those brought by claims firms. Most claims are paid by banks, or dropped, before they reach the ombudsman.
Speaking in the hub of Money Boomerang's operations, where 65 staff sift through a backlog of 30,000 live cases, Lowther said his firm searches through 15 years of a clients' financial history, uncovering an average of 2.1 cases for each claimant.
"If we advertise on TV it's expensive, we don't cold call, we don't text, we spend a lot of money, we've got an in-house compliance. All of that costs money and that's why we charge 25 percent," he said.
Lowther says the payouts, which average 2,750 pounds per case, are treated as an unexpected bonus by many customers and used for one-off purchases like holidays and home improvements.
Nigel Walker, a 41-year-old television engineer from south London, was awarded 3,000 pounds ($4,800) in compensation from Bank of America's MNBA, and Halifax, part of Lloyds, and does not regret giving up 20 percent in commission to a claims management company.
"I suppose I could have had the whole 3,000 pounds if I'd claimed myself but, the point is, I would never have done it off my own bat." ($1 = 0.6209 British pounds)
(Additional reporting by Myles Neligan; editing by Philippa Fletcher)