2.5m PPI customers to have complaints reviewed
Some 2.5 million customers are to have their payment protection insurance (PPI) complaints re-opened to make sure they have been treated fairly.
Banks, credit card providers and personal loan companies that sold PPI have agreed to the re-assessment of claims that were potentially unfairly rejected or resulted in inadequate compensation between 2012 and 2013 after being asked to do so by the Financial Conduct Authority (FCA).
Announcing the review - which is already underway - the regulator stated companies are getting better at dealing with PPI complaints.
More than 13 million complaints have been dealt with since 2007, with 70% of claims being upheld in the consumer's favour. Some £16 billion has been paid out in compensation since January 2011, which was when the FCA began monitoring payments.
The proportion of complaint decisions overturned by the Financial Ombudsman Service has also fallen from 88% in 2011 to 60% in 2012 and 56% in 2013.
However, the Ombudsman has had more than one million complaints from people dissatisfied with the outcome of their complaints, a figure that equates around 25% of all rejected complaints.
Martin Wheatley, chief executive officer, at the FCA, said: "Making sure anybody previously mis-sold PPI is treated fairly now, and paid redress where it's due, is an important step in rebuilding trust in financial institutions. In around two and a half million complaints this was not necessarily the case so, at our request, firms will be looking at these complaints again."
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.
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.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.