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Banks deluged with PPI claims

By Martin Fagan - news@consumerchoices.co.uk

The High Court ruling that banks are responsible for PPI mis-selling has opened the floodgates to claims.

Banks are being inundated with huge numbers of claims by angry consumers for mis-selling Payment Protection Insurance (PPI), according to new figures from the Financial Ombudsman Service (FOS).

In the last financial year (2010-2011), the FOS handled a record 206,000 formal complaints - a rise of 26% from the previous year. Of the total complaints, 51% concerned the mis-selling of PPI.

The 105,000 PPI complaints were a record for any type of financial policy in a single year. The FOS said the complaints service, started ten years ago, had experienced its biggest year to date.

But the Ombudsman warned consumers not to expect compensation immediately, claiming it could take banks "months, if not years” to deal with the backlog of existing complaints alongside new cases.

"The outstanding feature of our year was banks contesting PPI complaints all the way, on a case-by-case basis: it's been a year of non co-operation from the banks,” said chief ombudsman, Natalie Ceeney.

"And it's good to see that the number of disputes about some other financial products has started to fall."

More than three million people are in line for compensation after the banking industry dropped its legal battle over mis-sold Payment Protection Insurance in April.

The cost to the banks is estimated at anything between £5 billion and £9 billion. Lloyds banking group has announced it has set aside £3.2 billion to cover its exposure to mis-selling compensation.

Sarah Brooks, head of financial services at watchdog Consumer Focus, said: “The banks’ battle to dodge its PPI responsibilities has damaged the industry’s reputation, tied up the Ombudsman’s resources and, worst of all, left consumers out of pocket and out of patience.

“We now urge banks to deal promptly with PPI complaints so consumers are not forced to go to the Ombudsman and a line can be drawn under the whole sorry affair.”