UK Payment Protection Mis-selling Saga Continues
Payment Protection insurance (PPI) is in the news again with the UK financial complaints service, the Financial Ombudsman Service (FOS) reporting that its first quarter was the busiest ever with over 81,000 complaints – more than double the number received in the same period 2010.
Payment protection insurance, such as mortgage protection insurance, was the main reason for this substantial increase and the FOS have been receiving on average over 900 PPI cases each day.
Banks and others are already reporting record numbers of new complaints and it will be some time before we see the impact of those on our figures. So it’s difficult to tell whether we will be seeing still higher numbers yet – or whether the figures will now start to decline.
Tony Boorman, principal ombudsman at the FOS said, “When we come to publish the results for the next quarter, I expect the position on PPI will have changed again.”
“With complaints-handling rules ‘waivers’ agreed by the Financial Services Authority, the rate of new PPI cases has slowed – for the moment at least. ”
And the efforts by many banks to clear the backlog of cases that has built up should see record volumes of cases closed, and high uphold rates.
Unsurprisingly, the bulk of complaints have concerned PPI after the banks lost an appeal on a ruling to pay back the policies in the High Court earlier this year. The period also saw both the High Court decision on the PPI judicial review and the decision by the British Bankers’ Association not to appeal that decision.
Figures from some of the banks this week have revealed that the PPI saga is having an adverse effect on their balance sheets.
Barclays said that its profits had fallen by 33% compared to the first six months of last year, with a £1 billion provision for PPI claims largely to blame.
Results from HSBC also showed the bank has put almost £270 million to one side to deal with customers’ claims.
Lloyds Banking Group has also previously revealed that it has put £3.2 billion aside to pay possible claims. PPI was sold by banks on unsecured credit products such as loans, credit cards and some mortgage products.
Santander is the latest bank, and the last of the big banks to cave in and to set aside money to pay the compensation bill. Santander owns Abbey Alliance and Leicester and Bradford and Binlgley has set aside £543 million for PPI claims.
In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.
Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.
While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.
Santander was second, behind Barclays, in the list of most complained-about financial institutions during the second half of 2010.