Despite a noticeable drop in PPI complaints for every bank except HSBC and MBNA during the second half of 2013, the Financial Ombudsman Service continues to receive more than 1,000 PPI mis-selling complaints each and every day, newly released figures from the regulator reveal.
1000 PPI Mis-Selling Complaints Every Day
According to the ombudsman, Lloyds TSB received more PPI complaints during the second half of 2013 than any other financial institution. Second behind Lloyds TSB in number of PPI complaints was the Bank of Scotland, while Barclays, MBNA, and HSBC rounded out the ombudsman’s list of most complained about banks. While these banks represent the largest financial institutions in the UK, the ombudsman said the list was not weighted according to each bank’s number of customers.
Although the FOS and FCA are still dealing with an exorbitant amount of PPI mis-selling complaints, the total number of PPI complaints went down by 24 percent in the last six months of last year, falling from 327,035 complaints in the first half of 2013 to 248,801. During this time, the only financial institutions to witness an increase in complaints were HSBC and MBNA.
“The extraordinary volumes of financial complaints we saw in 2013 now look as if they are starting to level off at last – and that has to be welcome news for everyone,” said chief ombudsman Tony Boorman.
“But we’re still a long way from being able to say that PPI is sorted once and for all. Over 1,000 people every day are still asking us to sort out PPI problems that they’ve not been able to resolve directly with their bank,” Boorman continued.
The recent figures also reveal substantial differences in adjudications between financial institutions. For instance, of the nearly 37,000 complaints filed against Barclay’s, the FOS sided with customers 77 percent of the time. However, of the nearly 6,500 complaints against the Nationwide building society, only 10 percent were deemed valid.
The number of PPI cases involving a favourable ruling for customers is also falling. In fact, 75 percent of the 266,228 PPI cases in the first half of 2013 involved a favourable ruling for the customer, but the ombudsman only ruled in favour of customers in 56 percent of cases throughout the second half of the year.
Approximately half of all PPI complaints came from claims management companies. However, according to the ombudsman, there was no noticeable difference between the outcomes of these complaints and complaints lodged directly by customers themselves.
Although the FOS figures show a reduction in PPI complaints, Lloyds Banking Group recently announced that the volume of mis-sold PPI complaints in the UK is remaining high for much longer than expected. The famous UK bank is also facing many more rate hedge mis-selling complaints than it previously expected.
Due to the incessant flood of complaints it has been receiving, Lloyds announced prior to the release of the bank’s fourth-quarter results that it had set aside an additional £1.8 billion for administering PPI complaint investigations and compensating customers who were mis-sold investments by the bank’s staff.
“Our revised provision is based on the assumption that we will receive approximately a further 550,000 complaints. Together with an increase in administrative costs, this revised forecast accounts for approximately £1.1 billion of the increased provision,” Lloyds stated.
The bank added that £400 million of the allotment will be dedicated for unexpectedly high response levels to its efforts in identifying possible mis-selling cases. Another £300 million of the provision is dedicated to the unexpected costs of paying complaints that have already been defended. Carla Antunes-Silva, a banking analyst at Credit Suisse, noted that Lloyds’ £1.8 billion provision represents nearly one year of PPI payouts at the bank’s current rate.
Since the beginning of the PPI mis-selling scandal, UK banks across the board have paid a staggering £13.3 billion in compensation alone. According to figures recently released by the Financial Conduct Authority, the UK banking industry is shelling out £400 million to £600 million each month to victims of PPI mis-selling.
The administrative cost of dealing with PPI complaints is also quite substantial. In fact, some experts estimate the ancillary costs of receiving and investigating PPI complaints is equal to 15 percent of the overall compensation bill.
The FOS has more than doubled its staff over the past couple of years to handle the continuing flood of PPI complaints. Despite now having 4,000 people on staff, it is still finding it difficult to investigate and make judgments on PPI cases in a timely manner as most complainants must wait 18 to 24 months before receiving an adjudication.
As the number of PPI cases begins to decline, the delays should improve considerably, the ombudsman stated. The current staff at the FOS are on rolling three-year contracts, and the ombudsman said it does not plan on making any layoffs in the near future.
Although the number of complaints regarding mis-sold packaged accounts is but a fraction of the total number of PPI complaints, the number of these complaints is surging. There were 1,629 of these complaints in all of 2012, but in the second half of 2013 alone, there were 2,371 cases involving the mis-selling of packaged accounts.
Despite leading the UK in PPI complaint volume, Lloyds “continues to get more decisions right about banking complaints than any other major bank,” a spokesperson for the bank said. When the ratio of complaints to customers is taken into consideration, Lloyds actually trails behind several other banks in complaint percentages.
An MBNA spokesperson stated, “A large proportion of these complaints relate to PPI. During 2013, we carried out a significant proactive mailing campaign in order to address this legacy issue quickly and in the right way. As that work is now largely completed, we expect to see these numbers drop significantly in 2014.”
Meanwhile, according to Mark Neale, head of the Financial Services Compensation Scheme, the UK’s financial services industry has yet to experience the peak of mis-sold payment protection insurance claims. He believes PPI claims will continue on for the foreseeable future, despite claim payouts already surpassing £13 billion.
Neale, who’s responsible for helping consumers recover their funds when a financial institution becomes insolvent, said, “We will continue to see firms fail with PPI liabilities and it’s too early to say we’ve seen the peak.”
In fact, according to the latest FSCS budget, the organisation expects the number of PPI claims it handles to jump 20 percent during 2014. “Claims will go on for a number of years. I can’t tell you for how long, nor can I tell you when the peak of claims will be, but typically, you have a fairly normal distribution curve over the years,” said Neale.
Complaints from consumers regarding mis-sold PPI, which is marketed as a viable way for bank customers to protect their loan status and make their loan payments if they lose their job or become ill, have skyrocketed since 2008. The numbers may ebb and flow and everyone seems to have their own opinion on the matter, but banks as well as the ombudsman still receive over 1,000 mis-sold PPI complaints every single day and payouts are remaining steady at approximately £500 million per month with no end in sight.
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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim
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