Despite the Financial Ombudsman Service confirming that complaints about payment protection insurance have fall this year from 12,000 a week to 5,000 a week they still remain significantly high. Sorting out the mass mis-sale of PPI is a major part of the Ombudsman's workload and accounts for seven out of ten complaints received. As the last resort for disgruntled customers, last year the FOS dealt with over 400,000 complaints and because of the large numbers involved, it is going to take between 18 and 24 months to resolve its current backlog without taking into consideration those complaints it is still receiving.
PPI was supposed, in the event of illness, accident, redundancy or death to help policyholders repay loans and credit card debts. However, since the late 1990s, mis-selling to customers who did not need it, want it or were even be able to claim on the policy, was widespread. Some 45 million policies were sold between 1990 and 2010 and banks raked in £44 billion in premiums.
The financial watchdog said more than 13 million complaints have been lodged with the banks since 2007 of which 65 per cent have been upheld in favour of the customer. Nevertheless the Financial Conduct Authority is concerned that around 2,500,000 legitimate complaints may have been unfairly rejected, together with banks delaying compensation payouts or if a customer was successful not reimbursing enough compensation.
After years of fobbing-off or short-changing their customers, and insisting they had done nothing wrong, the FCA has ordered banks to trawl through old cases to make sure anybody previously mis-sold PPI is treated fairly and paid redress where it is due. This could mean an additional 4,000,000 more customers may be in line for PPI payouts.
In an important step in rebuilding trust in financial institutions, the biggest mis-selling offender, Lloyds Bank, have set aside another £500m taking their total bill for compensation to more than £10 billion.
The FCA said in the past three years the industry as a whole had so far paid out £16 billion of the £22 billion set aside to deal with customer compensations.
Meanwhile, in the last six months complaints received other than mis-selling PPI are about banking grievances, which have soared and are up by 7%.