Financial complaints rise 59%
Complaints to financial firms have rocketed by 59% over the first half of this year, with gripes about payment protection insurance being the main driver behind the surge.
According to the Financial Services Authority, more than 3.5 million complaints were made about financial products ranging from home insurance to credit cards in the first six months of 2012. Complaints about PPI shot up by 129% to 2.2 million, making up 62% of all complaints.
Which? chief executive officer Peter Vicary-Smith comments: "With well over two million PPI complaints being made in just six months, PPI is now the biggest financial scandal of all time. The banks must set aside more money for PPI claims and make it easier for customers to get back what they are rightly owed, without any hassle."
Which? analysis suggests that if PPI payouts continue at the same pace as the first half of this year, Lloyds could run out of provisions by November 2012, Barclays by December 2012, RBS within the next six months, and HSBC by August next year.
Looking across all financial complaints, the most frequent gripe was how a product was advised, sold or arranged, rather than issues such as customer service or excessive charges.
Almost £3.2 billion was paid out in compensation by firms to customers with complaints. This represents a massive rise from three years ago when just £284 million was paid out.
Of the different types of financial companies, banks and building societies paid the lion's share, handing out £2.9 billion in redress to unsatisfied customers. Santander received the highest number of banking complaints, at 157,165.
The complaints data did contain one positive trend: complaints about current accounts have dropped by 13%.
This article was written by our sister website Money Observer
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.