Hundreds of thousands of borrowers mis-sold worthless loans insurance are facing an agonising wait of more than a year before their complaint is investigated.
Mis-Sold PPI Claims
Up to two million people may have been mis-sold payment- protection insurance. Of these, 192,894 complaints have reached independent disputes arbitrator the Financial Ombudsman Service since 2005.
The rest of those mis-sold either do not know they could get a refund, or have had their complaint rejected by a bank and given up hope. Banks have been criticised for routinely rejecting complaints.
As many as nine out of ten consumers who turn to the Ombudsman for help have their complaint upheld. But the situation has reached a new low, with anyone who complains today likely to endure a 12-month delay before their claim is investigated.
So bad is the delay that the Ombudsman has admitted it could take three weeks just to send an acknowledgement letter. Around 70,000 complaints are already stuck in a queue with the Financial Ombudsman Service. The total number it will receive on PPI this financial year is set to break the 100,000 barrier for the first time, more than double last year.
The Ombudsman has received 98,000 complaints so far this year, with some 43,000 flooding in over the last three months.
Yet, as they return to profit and pocket bumper bonuses, banks are stonewalling customers. Many people would have paid hundreds of pounds over several years for loan insurance that is worthless.
Payment protection insurance – sold alongside loans and credit cards – is meant to be a safety net for those who become too ill to work or lose their jobs.
But in one of the biggest misselling scandals to hit the UK, up to two million policies were sold to people who would never have been able to claim, such as pensioners and the self-employed.
Banks are involved in a legal dispute with City watchdog the Financial Services Authority (FSA) which could force them to reopen thousands of past disputes which they had previously rejected – leading to a possible £4 billion compensation bill.
Banks claim the new rules are tougher than those in place when they sold the policies, and argue it is unfair and illegal to apply them to past complaints. While this legal showdown continues, they are refusing to handle new problems. Only Santander and Northern Rock have pledged to deal with disputes normally.
The FSA has threatened to take enforcement action against firms which disobey the rules. A spokesman says: ‘We still expect firms to carry out a full initial review of all PPI complaints received. Where possible, we expect them to try to resolve them.’
Meanwhile many consumers have paid hundreds of pounds in upfront fees to claims management firms.
The Ombudsman says eight out of ten complaints about PPI come via these firms, which can charge anything up to £720 upfront to handle your case.
Banks and building societies are estimated to take £1.4 billion in excess profits from these policies every year.
A spokesman for the British Bankers Association says: ‘Where the assessment of the complaint would not be affected by the judicial review, these complaints will be handled in the normal way.’
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