£1 Billion in payouts and rising

Banks and financial lenders have come under fire from the Financial Ombudsman Service (FOS) for delaying the compensation process in regards to payment protection insurance.

For advice on how you can claim, visit our partners Immediate Financial

Payment protection insurance (PPI) compensation has been a serious financial problem for banks and insurers over the past year as they have already forked out over £1 billion in payouts.

Many leading high street banks and lenders have set aside millions to pay off the compensation. Now, the FOS is adding another element to the mix as they issue extra fees for cases which are still waiting to be resolved.

Since the scandal unfolded, the FOS has given banks and lenders several months to award compensation. Since many banks have failed to do so in the set time frame, the FOS is considering adding on additional charges for banks and lenders.

The number of complaints the FOS has received over the controversial financial product has doubled since the 2010/11 financial year.

For 2012/13 it claims to have 130,000 PPI cases on its books, compared to 109,500 for this financial year.

The surge in complaints has significantly increased the workload for the FOS, who has taken on more staff as a result of the scandal. The industry regulator is now consulting on further plans regarding how to cope. This includes proposing that businesses pay an additional £350 on top of the standard £500 case fee.

PPI has been widely mis-sold to millions of people across the UK. Many of them were sold the product on the basis that it would cover repayments on loans or credit card debt in the event of unemployment, sickness or an accident.

However, whilst the product itself is still commonly used, it was sold in such a way that resulted in consumers paying for a product they could not use. In some cases, many were not aware they were paying for the product as banks and insurers would hide the fees within additional charges.

A large number of policyholders found that the insurance was of little or no use to them because it was invalid for them to make a claim. For example, if they were self-employed, a student or retired, they might not be working full time or the minimum requirement of 16 hours a week. Therefore, the policy would not pay out in the event of redundancy.

The FOS claims that customers have been through a series of delays and the banks have caused a massive inconvenience to the three million people who are expecting to receive compensation.
ìA year after the High Court ruling gave us legal finality on the approach that financial businesses should take on PPI complaints, itís disappointing that thereís little finality for significant numbers of consumers who are still waiting for their bank or insurer to deal with their complaint,î Tony Boorman, principal ombudsman commented.

ìThe delays and inconvenience that this causes consumers means the ombudsman now has to gear up for unprecedented demand and volatility in our workload.î

The FOS has taken on 285,000 new cases for the next financial year, which represents a 25% increase on the current financial year.

They have to settle more disputes involving mis-sold payment protection insurance than ever before. The largely increased workload for the FOS has led them to think about charging banks an extra £350, but this is only for banks or insurers who have more than 25 cases a year.

How big is the PPI scandal?
Payment protection insurance has been mis-sold for many years, with millions of unsuspecting consumers paying for a product they did not know they had or were not fully briefed on.

The scandal was brought to light in April last year after the FOS and FSA   received more than a million complaints about the way PPI was dealt with.  

Companies have been calling for an investigation over the mis-selling of payment protection insurance for many years. In 2004 it was discovered that banks were only returning 15% of their PPI income to claimants. The Citizens Advice Bureau found that many consumers were paying for it.

Consumer watchdog Which? reported in 2008 that one in three PPI policies were ëworthlessí.

The FSA has been imposing fines for mis-sold PPI since 2006 and the Office of Fair Trading (OFT) quickly became involved. The OFT found that one in five people had experienced difficulties with the insurance in 2007.

The British Bankers Association (BBA) decided not to appeal against the high court ruling, meaning that more then three million people could expect compensation following a claim for mis-sold PPI.

If you believe that you may have been mis-sold payment protection insurance, you can make a complaint to the Financial Ombudsman Service or alternatively a specialist claims company.

For advice on how you can claim, visit our partners Immediate Financial

Leave a Reply

Your email address will not be published. Required fields are marked *