Recent figures in the media have shown that around 1,500 new claims for mis-sold Payment Protection Insurance (PPI) are sent to the Financial Ombudsman Service every day. It is said that complaints now total 400,000 since the scandal first broke in 2008. The ombudsman becomes involved when a dispute between a financial institution and one of its customers cannot be resolved between them, as in the case of many people who claim PPI compensation. To vindicate those who brought the scandal to light, the ombudsman service has found in favour of 70% of cases where people reclaim PPI.
The main reason for PPI is so that people could keep up repayments on a loan, mortgage or other financial product, such as a credit card or store card, if they were to fall ill or lose their job. While this is in theory a good product, it was often sold to people who would not have been able to claim, such as the unemployed or retired, or sold to people who didn’t realise that it was not mandatory to purchase PPI, or that the cover was available elsewhere.
In total, the big High Street banks have put aside £9bn to compensate customers who were mis-sold PPI. And there is no way of knowing when the claims will stop. Obviously, when the scandal broke in 2008, banks and other lenders realised that they were in the wrong and had been caught out for mis-selling PPI, but it is unclear how many more borrowers are still entitled to claim.
People are quite rightly making enquiries or complaints to the ombudsman if they feel they have been mis-sold PPI. But this is having an adverse effect on the ombudsman’s office. It is a public service to represent the citizens of the UK, but its workload is growing daily, and there have also been complaints about both its performance and its ability to deal with the amount of new claims it is asked to deal with every day.
Claims Management Companies (CMCs) have also seen their workload increase, as more and more publicity about mis-sold PPI appears in the media, and an increasing number of borrowers who believe that they were mis-sold PPI are turning to them for advice in claiming back money which has been falsely taken from them. Banks, building societies and other financial institutions have all criticised CMCs for their aggressive marketing, but the people who mis-sold PPI in the first place are only trying to protect themselves from more expensive litigation. All cases will have different levels of complexity. Anyone who believes they have been mis-sold PPI should think carefully about their options. It is naturally easier to try to solve the dispute with a bank or other lender, but this is sometimes not possible. The man in the street may not have the time or inclination for this, and it is worth enquiring with a reputable CMC about the best options.