PPI generates more complaints for Financial Ombudsman

Several million people are in the process of reclaiming money for mis-sold PPI policies

Fresh complaints about the mis-selling of payment protection insurance (PPI) continue to flood into the Financial Ombudsman Service (FOS).

In the first half of this year the FOS received 135,170 new complaints, up 27% on the previous six months.

Of the new complaints 85,562, or 63%, were about PPI.

Of the PPI complaints that were dealt with, 71% were upheld in favour of the customer, a far higher success rate than for other types of complaint.

In the first six months of the year the FOS upheld nearly all PPI complaints against some businesses, mainly big banks and credit card companies.

The highest uphold rates were against Lloyds TSB (98%), MBNA (97%), Barclays (93%), CitiFinancial (93%), Welcome Financial (92%), Bank of Scotland (90%), HFC (part of HSBC, 90%) and NatWest (89%).

Deluge

The FOS deals with complaints if customers and financial services firms cannot agree a settlement between them.

Earlier this year, banks and building societies and even the FOS itself complained they were being deluged with spurious complaints submitted on behalf of customers by claims management companies (CMCs).

Since then, the government has announced a clampdown on the activities of CMCs in England and Wales.

They will only be able to take on a customer and charge them a fee if that person has signed a written contract.

And from next year, anyone with a complaint about the service given by a CMC will be able to complain to the Legal Ombudsman, who can order financial compensation to be paid.

Natalie Ceeney, chief executive and chief ombudsman, said: "The volume of PPI complaints doubled in the first half of 2012 - and has continued to increase since then with up to 1,500 new cases now arriving each day."

"We've also seen an increasing shift towards consumers doing it themselves rather than using a claims manager - with up to half of all new complaints now coming directly from consumers without paid-for representation, compared to less than 20% a year ago."

Mis-selling

PPI was originally sold alongside loans, mortgages and credit cards, wrongly in many cases, to cover repayments if people became ill or lost their jobs.

It was a huge money-spinner for the banks and about 16 million policies were sold after 2005.

The deluge of PPI complaints to banks, and then the FOS, started in 2010.

But at the same time the banking industry was in the High Court, contesting new rules from the Financial Services Authority (FSA) which said that all past PPI sales should be reviewed to uncover cases of mis-selling.

The eventual High Court ruling, in early 2011, unleashed a huge backlog of complaints which the banks had put on hold pending the court's ruling.

The bill for compensating past customers, and administering the complaints process, has now become so vast that 11 banks and credit card firms have already set aside nearly £10bn between them for compensating customers.

Marc Gander of the Consmer Action Group said the FOS figures showed that banks were still not treating some customers fairly.

"Obliging so many of their customers to go through the lengthy Ombudman process to have their complaints resolved suggests that our UK banks use the Ombudsman process as a "testing ground" to see if their customers are prepared to go the distance," he said.

"The Ombudsman called attention to this practice a few years ago and it seems that nothing has really changed."