Mis-selling of PPI has turned into one of the largest financial scandals the UK has ever seen; almost 100,000 complaints from borrowers have been recorded in the first half of this financial year alone. The Financial Ombudsman Service (FOS) has reported that the volume of new complaints in the past three months – almost 67,000 – is more than twice the number received by their offices in the first quarter of this year.
Payment Protection Insurance (PPI) is basically insurance borrowers can take out that will cover their payments on a loan, mortgage or credit card if illness, accident or unemployment leaves them unable to do so. However many such policies do not cover all contingencies, or they contain restrictions and qualifiers that make them useless to the borrower, but are not pointed out when the policy is sold.
As the huge scale of PPI mis-selling became apparent, British banks have collectively set aside around
£10 billion to cover existing and potential claims from borrowers, but the FOS and other consumer groups have warned that it may not be enough. Lloyds, the UK’s biggest retail bank, has already set aside around 4.3 billion pounds to cover repayment of mis-sold PPI policies; recent reports indicate the bank may have to increase that amount by as much as £2.3 billion.
Though the banks cannot deny the legality of most complaints, they can and do delay the repayment of funds; the FOS has been noting and criticizing the delays and inconvenience imposed by banks on consumers who file complaints. With the expected increase in volume, the process of restitution could be even longer if offending banks are allowed to drag their feet.
Only about 2.5% of claims in the past year have been found to be unsupported, and those were largely filed by claims management companies that typically keep at least 25% of any compensation. Consumer agencies such as the Citizens Advice Bureau have advised those filing claims to do so directly to the FOS if they have gotten no satisfaction from the bank in question.