Mismanagement of PPI sales has caused total bills to the largest banks in the UK to exceed £500 million in the first six months of 2011. Total PPI compensation bills have likely exceeded £2 billion. Affected banks range across the board, but the most affected were big banks like Barclays, MNBA and Lloyds TSB. The Ombudsman’s Office has upheld over 90% of all complaints against these banks regarding PPI purchases.
PPI Compensation Claims
PPI, or payment protection insurance, is way to protect against uncertain events. It allows the purchaser to continue making full payments on his or her debts should an unexpected event, such as job loss, medical emergency or other devastating situation occur. While it is another monthly payment in addition to debt payments, it can help in times of fortune to curtail the negative impact of misfortune if it should strike.
The problem, according to the Financial Ombudsman Service (FOS) and many analysts, is that banks often mis-sold the PPI policies. Some sales mismanagement appears quite outrageous, ranging from charging consumers for PPI without having informed them that they’d purchased it alongside their financial products to simply refusing to pay it out when needed. The root of problem, according to many observers, is that banks simply saw PPI as something that consumers wouldn’t know or care about, but for which they might be charged anyway.
Many customers felt pressured or suckered into deals with big banks regarding their PPI policies. Most didn’t entirely know why they had PPI, yet were asked to continue paying it without proper explanation. Many were told that it was mandatory or that it was just an additional service fee. As a result, they didn’t realise that they could utilise it when disaster struck. For those that did realise it, big banks simply did not have the infrastructure or did not want to develop an infrastructure for PPI payouts.
With over 99% complaint uphold rate for some banks, it is clear that the problem was endemic, systemic, and intentional. Banks simply used the vehicle of a PPI policy, which they hoped the majority of people wouldn’t understand, as an additional money-making measure.
History of Problems with PPI
Problems with PPI have been ongoing for at least a year, though it has just been in early 2012 that they have received national attention. Infrastructure for filing complaints en masse has only just emerged, forcing national agencies like the FOS to take notice. In August 2011, there was a backlog of over 200,000 PPI-related complaints with the FOS; however few, if any newspapers or networks reported on the issue. However, as early as October 2011 there was another major scandal involving HSBC failing to pay the proper amount for PPI policies. The hope is that as this issue receives national attention, bank policies will begin to change.
It is clear that banks have not seen the expense as a necessary one; however, as consumers have mobilized and banks are on the line for over half a million pounds of payments and billions more in administration costs, many analysts predict that financial industry policies toward payment protection insurance will begin to change.
The FOS has currently hired three hundred people to work exclusively on the backlog of thousands of PPI Claims complaints, and big banks are expected to hire at least six thousand additional workers to handle administration issues associated with the PPI payouts.
Banks Associated with PPI Compensation Bills
By far, Barclays has been most hurt by the PPI compensation fiasco. Nearly 7,000 complaints were logged in the second half of 2011, with 84% of these complaints upheld by the FOS. Coming in second place is the MBNA Europe Bank, with over 5,000 complaints and a 99% uphold rate. Lloyds TSB was also a major player, with over 4,000 complaints and a similar 87% uphold rate. For major upstanding banks in Great Britain, these are incredibly negative customer service numbers.
Other banks involved in the issue included:
– Capital One (Europe)
– Black Horse
– HSBC Bank
– Bank of Scotland
– Santander UK
– Nationwide Building Society (NBS)
– Clydesdale Bank
– HFC Bank
– and others…
Sheer PPI complaint numbers rose an outstanding 26% in 2011 over 2010, and the upheld complaints number has risen catastrophically. The Financial Ombudsman’s office received over 106,000 complaints about various banks in the last six months of 2011 alone on top of over 150,000 received in the first six months.
Big Bank Consequences
PPI compensation has been a huge issue for British banks, yet few management officials have been sacked over the issue thus far. Former Lloyds boss Eric Daniels had his bonus cut back to _only_ about a million pounds, while other executives have seen similar cuts. This would appear to indicate that the companies did not lose as much overall as they may have appeared to and that the bonus cuts are only a formality to quell public outrage.
Despite this, customer satisfaction at large banks like Lloyds and Barclays, which offer consumer financial services like loans, mortgages and lines of credit, is at an all-time low. Complaints about other financial services also increased in 2011 by about 15% overall. Complaints about life insurance and pensions increased by a whopping 42% in 2011, while complaints about general insurance rose by about 22%. Complaints about credit lines and standard loans rose by around 10%.
Analysts predict that PPI compensation will act almost as a mini-stimulus for the economy. With compensation bills averaging around three thousand pounds and with hundreds of thousands of purchasers in line for payouts, the economy could see a rise in consumer spending as the backlog is processed.
Despite the happy ending, however, the PPI compensation fiasco serves to highlight a growing problem in the financial services industry. As the global financial crisis continues to affect Euro nations, major banks with a stake in the problem have attempted to find ways to recoup their losses on the backs of unsuspecting customers. The PPI fiasco was a huge, unreported problem throughout 2011. Many consumers hope that the FOS and other consumer watchdog groups will keep their eyes out and help to prevent any future attempts to hoodwink banking customers out of their hard-earned money.
PPI Claims News
PPI Claims are falling according to regulator
Complaints about PPI Claims have fallen for the first time in three years according to the Financial Conduct Authority (FCA). In the 1st half of 2013 1.8 million PPI complaints were recieved compared to 2.2 million PPI complaints recieved in the previous 6 month.
However reports like these need to be questioned based on figures reported previously from the FCA within the 1st half of the year.
PPI Complaints to Cost the Banks an extra £400m in fees to FOS
Banks in the UK are set to be charges an extra £400m in fees by the Financial Ombudsman service (FOS) for dealing with PPI complaints. The FOS charges a standard fee of £550,00 per complaint regardless of whether the complaint is upheld against the financial insitution or not.
Our Successful PPI Claims featured on BBC1 – Ripoff Britain
Ripoff Britain on BBC1 with Gloria Hunniford, investigates mis sold PPI and one of our succesful clients, Steve White, discusses his PPI Claim.
We have provided a transcribed version of the Clip below
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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