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| FOS blames banks for rise of PPI claims management firms | FOS blames banks for rise of PPI claims management firms |
| (4 months later) | |
| The failure of banks to properly investigate mis-selling claims around payment protection insurance (PPI) led directly to the rise of the claims management industry, the Financial Ombudsman Service has told MPs. | The failure of banks to properly investigate mis-selling claims around payment protection insurance (PPI) led directly to the rise of the claims management industry, the Financial Ombudsman Service has told MPs. |
| In an appearance before the Treasury Select Committee, chief ombudsman Natalie Ceeney laid the blame firmly at the feet of the financial services industry. "Banks not investigating cases properly played into PPI firms' hands. In a quarter of cases where banks said customers didn't have PPI, they did – the banks were not doing their job properly," she said. | In an appearance before the Treasury Select Committee, chief ombudsman Natalie Ceeney laid the blame firmly at the feet of the financial services industry. "Banks not investigating cases properly played into PPI firms' hands. In a quarter of cases where banks said customers didn't have PPI, they did – the banks were not doing their job properly," she said. |
| The ombudsman added that "detriment that built up over many years" has led to a "thriving claims management industry that is, in some cases, exploiting people." Most of these companies charge at least 25% of any successful claim, and some charge more. | The ombudsman added that "detriment that built up over many years" has led to a "thriving claims management industry that is, in some cases, exploiting people." Most of these companies charge at least 25% of any successful claim, and some charge more. |
| "Consumers have been caught in the middle," Ceeney said. "They are told by PPI firms that they need help to claim, which they don't. But then those same customers are told by their bank that their claim has been rejected." | "Consumers have been caught in the middle," Ceeney said. "They are told by PPI firms that they need help to claim, which they don't. But then those same customers are told by their bank that their claim has been rejected." |
| Ceeney said it is only by the time many consumers get to the ombudsman that they realise they did not need to use a PPI claims management company, "but it's too late because they have already signed a contract." | Ceeney said it is only by the time many consumers get to the ombudsman that they realise they did not need to use a PPI claims management company, "but it's too late because they have already signed a contract." |
| PPI is insurance typically sold to consumers at the point of sale of personal loans, credit cards and other forms of debt, which is designed to meet their repayments in the event of accident, sickness or unemployment. | PPI is insurance typically sold to consumers at the point of sale of personal loans, credit cards and other forms of debt, which is designed to meet their repayments in the event of accident, sickness or unemployment. |
| However, many customers have discovered after paying for PPI policies that they would not qualify for a payout due to exclusions in the terms and conditions, while others didn't even realise they had signed up to buy the insurance. | However, many customers have discovered after paying for PPI policies that they would not qualify for a payout due to exclusions in the terms and conditions, while others didn't even realise they had signed up to buy the insurance. |
| In 2005 Citizens Advice raised a super-complaint to the Office of Fair Trading, calling on it to launch an investigation into the PPI sector, but companies sold millions of policies during the next five years until the Financial Services Authority introduced rules to stop mis-selling in late-2010. | In 2005 Citizens Advice raised a super-complaint to the Office of Fair Trading, calling on it to launch an investigation into the PPI sector, but companies sold millions of policies during the next five years until the Financial Services Authority introduced rules to stop mis-selling in late-2010. |
| The ombudsman deals with complaints that have not been settled to a consumer's satisfaction by a lender – it is currently receiving up to 400 PPI complaints every hour and upholding seven in 10 cases in the consumer's favour. Compensation averages £2,750. | The ombudsman deals with complaints that have not been settled to a consumer's satisfaction by a lender – it is currently receiving up to 400 PPI complaints every hour and upholding seven in 10 cases in the consumer's favour. Compensation averages £2,750. |
| Ceeney said dealing with PPI complaints was "the biggest clean-up in financial services history". In its last complete year, to March 2012, the ombudsman dealt with 157,716 PPI complaints – the highest number ever received in a 12-month period about a single financial product. | Ceeney said dealing with PPI complaints was "the biggest clean-up in financial services history". In its last complete year, to March 2012, the ombudsman dealt with 157,716 PPI complaints – the highest number ever received in a 12-month period about a single financial product. |
| "I absolutely think the banks dragged their feet," Ceeney told the committee. "Banks say they have to resource-up fast to handle the number of PPI complaints they are getting – my issue is whether their standards of investigation are still good enough. | "I absolutely think the banks dragged their feet," Ceeney told the committee. "Banks say they have to resource-up fast to handle the number of PPI complaints they are getting – my issue is whether their standards of investigation are still good enough. |
| "We want firms to look a couple of years forward or backward, at previous addresses, at married names – in too many cases the banks haven't made those checks." | "We want firms to look a couple of years forward or backward, at previous addresses, at married names – in too many cases the banks haven't made those checks." |
| On the subject of fraudulent PPI claims made by individuals and claims management companies, the deputy chief ombudsman Tony Boorman said it was not fraudulent for a customer to ask a firm whether they had PPI. | On the subject of fraudulent PPI claims made by individuals and claims management companies, the deputy chief ombudsman Tony Boorman said it was not fraudulent for a customer to ask a firm whether they had PPI. |
| "It's a perfectly legitimate question to ask of a financial services provider," he said. "It's not a fraudulent claim … Both sides, if they were a little bit more careful and sensible, could work their way together through this problem." | "It's a perfectly legitimate question to ask of a financial services provider," he said. "It's not a fraudulent claim … Both sides, if they were a little bit more careful and sensible, could work their way together through this problem." |
| But Ceeney did issue a warning to consumers about the claims management industry. "It is often the most vulnerable consumers who were mis-sold PPI in the first place and they are now being ripped off for a second time by claims management firms. Absolutely. Some of the worst practice we see is not only the cold calling, but companies taking fees from consumers who are not due any compensation so are being left worse off." | But Ceeney did issue a warning to consumers about the claims management industry. "It is often the most vulnerable consumers who were mis-sold PPI in the first place and they are now being ripped off for a second time by claims management firms. Absolutely. Some of the worst practice we see is not only the cold calling, but companies taking fees from consumers who are not due any compensation so are being left worse off." |
| The ombudsman said 3 million people have raised PPI complaints to date, but that represents just one in 10 of the total number sold. | The ombudsman said 3 million people have raised PPI complaints to date, but that represents just one in 10 of the total number sold. |
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