Are banks stalling paybacks of mis-sold PPI?

Payment Protection Insurance (PPI) is charged by banks in case a customer defaults on loans, mortgages or credit cards such as in cases of redundancy.  Thousands of cases have arisen where customers have been mis-sold PPI and have initiated cases to reclaim monies lost.  Current events indicate that banks may be stalling in PPI compensation payouts.

Complaints about banks to Financial Ombudsman Service (FOS) rise

Complaints to FOS about the improper handling of mis-sold PPI claims have nearly doubled to 85,562 during the first six months of 2012, an increase of approximately 75 per cent when compared to 49,419 in the final six months of 2011, but similar to the first half of 2011.

During 2011, regulators gave banks more time to assess claims for PPI compensation.  With banks having more time to assess claims, some commentators are suggesting that they may have stalled the claim process.  The fact that FOS has decided about 72 per cent of PPI complaints in the customer’s favour indicates that banks may have stalled the payback process too.

The complaints were about banks’ use of technical claim forms, turning away valid complaints, poor claims handling and stalling payments.  The most complaints were about Barclays followed by Lloyds TSB, MBNA, Lloyds TSB Black Horse, Capital One and HSBC.

Changes in banks’ PPI responsibilities

The authorities have reviewed the conduct of parties involved on behalf of consumers trying to reclaim PPI.  The result is that banks have been given a deadline by which to process PPI claims and improve their complaints handling.  The fact that the FSA have given such a deadline may also indicate that banks have taken longer than they should have in processing PPI claims.

Banks have raised alerts about fraudulent claims for PPI mis-selling.  Out of approximately 3,000 PPI complaint calls to FOS daily, half are investigated by the Ombudsman.  Some cases have been in the favour of banks.  Yorkshire Building Society, for example, has won 93 per cent of cases.

Investigating claims and fraudulent activity takes time.  This factor may contribute to a delay in banks processing mis-sold PPI.  The appeals by banks to avoid the large payments of compensation to so many consumers also delays payouts.

Self-claim versus use of claim management companies

Claim management companies use intensive marketing to encourage people to reclaim PPI that may have been mis-sold to them.  These companies act as an agent or middle-man and take a large proportion of the PPI compensation claims and may potentially slow down the PPI claims process.

Since last year, consumers have received more information through the media about PPI, how to identify PPI mis-selling, and steps to take in order to claim.  The spike in complaints and self-representation may be due to consumers having more knowledge about PPI and the claims process, who are therefore coming forward to make their own cases.

A simpler claims process with easier forms to complete may add to consumers being able to handle claims themselves.  Self-representation for claiming PPI, or complaining about how claims are processed, saves consumers the fees charged by the claims management companies.

Top ten institutions accused of mis-selling PPI plans

And the winner is … Barclays.  Or the biggest loser, depending on how one looks at it.  One of the High Street’s longest-established financial institutions was also the one that most people complained about in the second half of 2011.  Around 12,000 complaints were brought against the bank by its own customers, with a massive 99% of these being successful.  This is the same percentage of successful cases brought against Lloyds and MBNA Europe Bank.

While an average of 72% of all complaints were upheld by the Financial Ombudsman Service across Britain’s banks and other lenders, complainants were successful in 84% of those cases brought against Barclays.  The company has admitted that PPI claims were responsible for a 67% rise in complaints against it.

Lloyds had been a clear leader in the first six months of 2011, with the most complaints about its services, but was pushed into third place by Barclays, with MBNA in second.  Across the industry, complaints against banks continued to rise.  Complaints regarding mortgages rose by 38% to 5,202, complaints about insurance increased by 22% to 14,000 while cases involving credit cards were up by 9%, reaching almost 29,000.

After consumer pressure, it emerged that banks had been systematically mis-selling PPI to customers, either face to face or over the telephone, for a number of years, and it was viewed within the industry as standard practice.  The lenders were either deliberately not informing their customers correctly about whether taking out PPI was mandatory, whether it could be purchased elsewhere, or selling it to customers who would not be able to claim on the policy.

When it comes to complaints about mis-sold PPI, there are a couple of disparities.  The majority of High Street lenders were unsuccessful in, on average, more than 95% of cases, but Nationwide and Capital One were found to be liable for PPI compensation in only 7% and 11% of cases respectively, despite receiving around the same number of complaints against them.

It emerged that more than £2 billion was paid by all the banks combined in 2011 over PPI mis-selling.  The headline figures have made so much publicity that it has encouraged more and more people to try to find out whether they can reclaim PPI, with banks setting aside an estimated £7.5 billion to cover the expected compensation.

The top ten banks, in order of PPI complaints against them, were:

  • Barclays, with 6,975 complaints, of which 99% were upheld
  • MBNA Europe Bank, 5,377 complaints, 99% upheld
  • Capital One (Europe) 5,057 complaints, 11% upheld
  • Black Horse, 4,999 complaints, 98% upheld
  • Lloyds TSB, 4,257 complaints, 99% upheld
  • HSBC, 2,813 complaints, 87% upheld
  • Bank of Scotland, 1,954 complaints, 98% upheld
  • Nationwide, 1,778 complaints, 7% upheld
  • Clydesdale Bank, 1,336 complaints, 57% upheld
  • HFC Bank, 1,078 complaints, 93% upheld

It is clear from the figures that all lenders have been found to have mis-sold PPI.  It makes sense for anyone who has ever had any kind of loan to see if they are owed PPI compensation.

Should it be easier to claim for mis-sold PPI?

Thousands of people in the UK have successfully claimed against mis-sold Payment Protection Insurance (PPI) since test cases in 2008 led to changes in regulations.  But while people are able to download template letters to send to their lenders when claiming PPI compensation, the government has done little to help customers with the process.

Anyone who has had to go cap in hand to a bank for a loan will naturally only be thinking if his or her request has been accepted.  They can then be led down the path of taking out PPI that may be either unnecessary or next to useless.  It only came to light after many years of mis-selling that banks and other lenders were getting their customers to pay for products that were not fit for purpose.  Lenders’ salespeople are experienced in making as much commission as they can from every customer, so it is natural for them to use techniques that will earn themselves more on each deal.

As there are thousands of cases which have already been settled successfully, it would seem that the government could have done more to help people who have genuine grievances, but do not possess the knowledge or experience of PPI mis-selling to help them pursue their claim.  Most people have enough to do in their lives, apart from learning the language of financial documents and financial litigation.

Just as one would take their car to the local garage to be serviced by professionals, so anyone with a reason to believe that they have been mis-sold PPI should look to seek the services of a Claims Management Company.  These are professional people who take their job seriously, who are experienced in the area and will act in the best interests of their clients.  They will, of course, expect a fee if they take on your claim and it is successful, but it is not reasonable to expect anyone to work for nothing.  At the same time, if they take on your claim and it is not successful, you have nothing to pay, so nothing to lose.  Recent rulings from the financial authorities have forced the banks to write to customers whom they believe to have been mis-sold PPI.  Not only that, but those claimants whose claims were rejected in the past can now claim again, and many of these have been successful in their claims about mis-sold PPI.

So while the government’s Financial Ombudsman’s Service is overwhelmed with 2,500 cases every day which could not be resolved between the borrower and the lender, it is not advertising any practical help for the thousands of people who want to reclaim PPI.  The most sensible option for people who think they have been mis-sold PPI is to seek professional advice.  Until the government makes moves to help the thousands of genuine complainants who feel they have been victims of PPI mis-selling, the best option is to consult experienced professionals whose daily job is PPI compensation.

Fraudulent ppi claims hurting industry

There has been much written on this subject but it seems there are an increasing number of unscrupulous claims management companies out there that are taking advantage of consumers and slowing down ppi claims processes with the lenders.

Essentially, by sending in spurious blanket claims to lenders like Lloyds TSB, where in actuality only a small percentage are actually valid, they are slowing down the process for everyone.

Many of the industry watchdogs and the main lenders are becoming increasingly aware and rightfully annoyed with these actions. Indeed the actions of the companies that engage in these activities are giving CMC’s (Claims Management Companies) a bad name.

However, there are good companies out there that do a great job and who process the ppi claims properly, essentially earning the commission share from the client. We pride ourself on our processes and feel very strongly that our procedures and systems allow us to deal with client ppi claims efficiently and competently.

Our process involves obtaining the loan documents from the lender, at our cost, so that we may properly ascertain, firstly the presence of ppi and then the validity of the claim. Following that we will recontact the client to perform a detailed question & answer session to obtain further details. Only then will we proceed to write a detailed ppi claims letter, highly personalised to the individual case and certainly not a standard template letter.

This process is lengthy but we believe in earning our payment from our clients.

In addition, by obtaining all the loan documents from the lender we are able to decide and advise on whether the settlement from the lender is good enough, or whether it’s well under what should be paid. In this scenario we would advise a rejection and would fight for whats due by liaising with the lender on the matter. It is only by following these detailed processes that one can make an informed decision. Anything less for your ppi claim would be considered poor value for money in our opinion.

Banks allocate further funds to the ppi claims process

Following the huge increase in PPI claims over the last year and since the judicial review, many of the big banks and indeed some of the smaller firms have been forced to allocate further funds to the cause of compensating consumers who were mis sold PPI.

It seems that the banks grossly underestimated the volumes of complaints from consumers and have, as a result allocated huge piles of money for compensation.

Barclays bank have set aside an additional £300 million towards the payment of mis sold ppi, which adds to the already large sum of £1 billion.

Industry experts believe that across all the major banks there is approximately £6 billion owed back to consumers. If you then add in all the smaller firms and financial institutions that figures jumps to around £9-10 billion.