Banks struggling to process PPI claims
Many banks are still struggling to hit their targets to deal with payment protection insurance complaints, despite an extension from the Financial Services Authority (FSA).
Under traditional guidelines a complaint has to be handled within eight weeks but in June the FSA made a temporary agreement with Barclays, Lloyds and RBS to allow them more time to deal with the extraordinary number of complaints they've received.
Under this deal PPI complaints that the banks put on hold during the judicial review must receive a decision on their complaint by the end of August.
In addition, PPI complaints received by the banks after the conclusion of the judicial review in May but on or before the 31 August needs to receive a reply to within 16 weeks.
Moreover, PPI complaints received from September to 31 December will be responded to within 12 weeks.
However, despite this extension the banks are struggling to deal with all complaints in time.
In order to try and deal with the backlog banks are aiming to have sent letters to all these complainants by the end of the month telling them whether or nor their complaint is being upheld but most of them won't receive their compensation until up to four weeks later - they may not even be told how much compensation they are going to receive.
Once complaints have been dealt with successful claims should receive a refund on the premiums paid plus backdated interest at a rate of 8%.
What does this all mean for you?
If you have already made a complaint to your bank for PPI you should receive a response by the end of the year at the very latest (but by the end of August if you made your complaint before April 20).
If you have yet to make a complaint and you make it before the end of this year the banks have to respond to your complaint within three months.
Anyone who hasn't heard back from their bank within that time can take their complaint to the Financial Ombudsman Service, but given the disorder surrounding the PPI issue it's probably worth contacting your bank again first to check on the progress of your complaint.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.