PPI complaints start to subside
Complaints to the Financial Ombudsman Service (FOS) sharply declined in the second half of 2011 as banks improved their handling of payment protection insurance (PPI) mis-selling cases.
The FOS received 106,193 new complaints in the last six months of the year - down 149,925 from the previous six months.
The majority of complaints at the start of the year were related to the mis-selling of PPI and this remained one of the main issues for the FOS throughout 2011.
The FOS says because banks were then given more time to deal with these cases fewer consumers had to resort to complaining. There was a 53% drop in complaints about PPI between 1 July and 31 December and a rise of 25% in the number of complaints upheld in favour of consumers.
Banks failing customers
Peter Vicary-Smith, chief executive of Which?, says: "Today's data from the FOS is further evidence that some banks are systematically failing to treat their customers fairly when things go wrong. It is especially unacceptable that tens of thousands of consumers have been forced to take their PPI compensation claim to the Ombudsman, where the overwhelming majority of complaints are then upheld."
Mortgage complaints increased by 38% in the second half of the year, while investment-related complaints rose by 5% in the same period.
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.