Financial Services Ombudsman Flooded with PPI Complaints

Banks sell payment protection insurance (PPI) policies to consumers for loan payment protection should a consumer become unemployed or too ill to work.

However, UK banks recently were caught up in the largest insurance mis-selling scandal the industry has experienced.

The fallout has seen millions of claims being processed but hundreds of thousands of customers have complained to the financial services ombudsman after failing to get satisfactory resolution with their bank.

Background to the PPI Scandal

Many consumers were sold PPI policies they could never make claims on - some never needed a PPI policy in the first place and other consumers were making payments on PPI policies they were unaware had been issued by their bank. Further, many legitimate PPI policy holders suffered unnecessary delays in claim pay-outs.

When the scale of the scandal was discovered, a huge claims industry rapidly developed. Due to the volume of claims, UK banks set aside £18.6 billion to fund the PPI claim pay-outs. The average PPI policy claim pay-out for a mis-sold policy is £2,750; however, pay-outs have been reported as high as £65,000.

Referral to the Financial Service Ombudsman

When a bank and consumer cannot reach an agreement regarding the execution of a PPI policy, the case will be referred to the Financial Ombudsman Service for resolution. The amount of PPI claims sent to an ombudsman has risen sharply.

The first half of 2013 saw the highest number of mis-selling complaints to the ombudsman ever recorded at 266,288 complaints, representing a total of 86 per cent of all complaints. Compared to the same period in 2012, PPI claims have increased by 26 per cent.

Disparity of Claim Outcomes

The Financial Ombudsman Service reports a wide disparity amongst claim outcomes based upon which bank issued the PPI policy.

For instance, an appointed ombudsman found in favour of the consumer in only 7 per cent of the PPI policy claims brought against Nationwide Building Society. In the overwhelming majority of PPI policy claims against Nationwide, no mis-selling was found. In contrast, an appointed ombudsman found in favour of the consumer in approximately 90 per cent of PPI policy claims brought against Lloyds Banking Group.

PPI Claims Management Companies

Due the vast number of mis-sold PPI policy claims, an entire industry has emerged to manage and facilitate consumer claims for a fee. While these intermediary management companies are entirely unnecessary for a consumer to make a PPI policy claim or a complaint to the financial ombudsman, some consumers might not otherwise be aware of the mis-sold policy or of their ability to make a claim.

Anyone unsure about their entitlement to make a claim regarding mis-sold PPI cover or in relation to any other issues should seek legal advice. For more information, contact Peter Gourri today by email PGourri@rollingsons.co.uk or telephone 0207 611 4848.