The start of financial year has seen a dramatic rise in the number of PPI mis-selling claims referred to the Financial Ombudsman Service (FOS). From April to June 2011, the adjudicator received 56,025 new cases, working
Millions mis-sold PPI
Payment protection insurance (PPI) mis-selling has been one of the main financial scandals of recent years. In October 2006, the Competition Commission estimated there were approximately 20 million policies in force, with between 6.5 million and 7.5 million further policies being sold each year.
Many consumers were mis-sold PPI policies and some were unable to reclaim PPI paid due to pre-existing medical conditions or because they were self-employed, while others were signed up for PPI without having the terms of their policy explained to them. Providers often sold PPI in a way that suggested – incorrectly – it was a condition of the loan.
The Financial Services Authority (FSA) has carried out 24 PPI-related enforcement actions against banks and other financial firms since 2005, levying a total of £12.6 million in fines for mis-selling.
Claims backlog clears
Although thousands of people had successfully claimed for a refund of premiums and compensation in cases where they had been mis-sold PPI, in January 2011 the British Bankers Association (BBA) went to court with the FSA and FOS over the mis-selling of PPI policies.
However, in April 2011, a high court judge ruled that the BBA lost their case over complaint handling rules on PPI and the following month, the BBA announced it would no longer appeal the ruling of the high court, meaning that banks must continue to compensate consumers if they were mis-sold a policy.
Commenting on the impact of the BBA action, Tony Boorman, principal ombudsman and decisions director, said: ‘During the period of that judicial review, our ability to progress cases against many banks and other financial businesses was seriously hampered, meaning that fewer cases than we had planned were resolved. That had an impact on the ‘uphold rate’, as inevitably it was the cases that we thought should be upheld that proved most difficult to finalise.’
FOS referrals should fall
Looking forward to the second half of the financial year, Mr Boorman suggested that fewer cases should find their way to FOS: ‘By then, banks and others will be dealing with cases that they received after the judicial review, where there is no dispute that they should be following the ombudsman’s approach and the FSA’s complaints-handling guidance.’
Rejected cases reviewed
Welcoming the settlement of outstanding PPI cases, Which? Senior Advocate Lucy Widenka said: ‘To ensure all PPI customers are given a fair opportunity for redress, we think that all previous and existing complaints should be reviewed. This includes complaints that have been previously rejected. We think that banks should proactively contact those customers with rejected complaints as part of their broader contact exercise.
People who have their previously rejected complaint reassessed should also be able to escalate their complaint to the FOS.’
Anyone who thinks they may have been mis-sold PPI and has yet to make a claim can use a simple to use, on-line complaints tool to begin the process of gaining redress. There is no need to go to a claims management firm as the procedure is clear and straightforward and there is step-by-step guide to reclaiming PPI on our website.