Claims managers fuelling PPI complaints
While the number of PPI complaints reported reduced by half compared to the previous year, a greater proportion of them came from claims management firms. Some 79% of complaints were filed by such companies, compared to 72% in 2014 and just 57% in 2013.
The increase in activity from the claims firms comes despite the FOS telling consumers using a claims manager won't give them a better chance of 'winning' their complaint and is "likely to significantly reduce any compensation they receive".
For example, moneybackppi.com, a PPI claims firm advertising on Google, charges a 15% (12.5% plus VAT) cut of any compensation awarded as its fee. And its website insists that this is a "low and competitive fee".
However, the FOS added that it recognised some people prefer to pay someone to complain for them and so it works with the companies to dissuade them from referring cases to it unnecessarily.
Current account and payday loan complaints
In the past year, the FOS also said it has seen a sharp spike in complaints about current accounts and payday loans.
Problems with current accounts were up by 78% to 35,344 and were mainly driven by complaints relating to packaged accounts – accounts that come with a range of extras, such as insurance, usually for a monthly fee. These accounted for almost two-thirds of current account complaints, and the number of packaged account complaints was up 278% year-on-year.
The FOS said it upheld 36% of all current account complaints in the 12 months to March 2015, compared to 40% a year earlier.
Meanwhile, complaints about payday loans rose by 46% on the previous year, with the FOS dealing with 1,157 new complaints. FOS data also showed that consumers in the North East were more likely to complain about PPI.
In the FOS' 15-year history, it has answered 15 million consumer enquiries and sorted out 2.8 million disputes between financial companies and customers.
Chief ombudsman, Caroline Wayman, explained: "The world has moved on and changed significantly since I first joined the ombudsman as an adjudicator in 2001. Yet our workload over the last 15 years has been constantly dominated by the past - clearing up the fall-out of the mass claims and mis-selling scandals of the last decade and a half.
"But 15 years of sorting out millions of these problems have given us unparalleled experience, knowledge and understanding of why complaints happen – and how they could be avoided in future. That's why our focus continues to be on complaints prevention and sorting things out pragmatically as soon as problems emerge."
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.
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
Short-term cash loans designed to be borrowed mid-way through the month to tide the borrower over until they next get paid, whereupon the loan is settled. Generally used by people with bad credit ratings and/or no access to short-term credit such as an overdraft or credit card. Like logbook loans, this type of borrowing is hugely expensive: the average APR on payday loans is well over 1,000% and in some instances can be considerably more.
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.
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.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
A current account that charges a monthly fee in return for a “package” of additional services, such as travel insurance, credit card protection, mobile phone insurance, identity theft insurance, car breakdown cover or a “concierge service” that will book airline and theatre tickets or restaurant tables. However, many consumer experts say the features are overpriced and that more competitive deals exist elsewhere in the market and that very few packaged account holders actually take advantage of the features.