PPI Complaints on the Rise

24th March, 2009

The Financial Ombudsman Service (FOS) has reported that it receives more than 800 complaints each week regarding payment protection insurance (PPI) - a number which the service provider has called "unprescendented."

PPI insurance, which is supposed to pay out if a policyholder is unable to pay loans due to illness or redundancy, is being criticised by consumer groups on the basis of significant claim restrictions. Over the last few years, authorities such as Competition Commission, the Office of Fair Trading and the Financial Services Authority (FSA) have all taken an increasingly dim view of PPI, branding the product as very lucrative for the bankers and lenders who sell it. The Competition Commission even took measures to impose severe restrictions on the sale of new PPI policies. There are currently 12 million PPI policies in force.

Groups have also noted that the insurance has often been mis-sold to customers while they are securing a loan. However, lenders and insurers are often reluctant to agree with customers regarding mis-selling of the product, prompting complaints to sky-rocket. The FOS received 26,234 PPI complaints, up from the 4,889 dealt with in 2007. By the end of 2008, complaints were flowing in at 500 a week - a number that has now increased to 800.

An FOS spokeswoman told BBC News:

"We are upholding an unprecedented number of consumer complaints about PPI…[and] have reported our concerns about some firms who seem to be systemically and deliberately mis-handling complaints."

Last year, the FOS asked the FSA to consider taking action against those firms which were being obstructive.

However, a spokesman for the Association of British Insurers (ABI), whose members underwrite the policies, said it did not condone mis-selling. He told BBC News:

"We accept there have been mistakes in the past…but in this day and age for many people this insurance is valuable."

Brian Capon, spokesman at the British Bankers' Association, also said: "payment insurance continues to provide valuable protection if someone is unable to work through illness or loses their job and it is important that people are not discouraged from taking it out."

"There has been a vast amount of publicity about PPI recently which has no doubt been a factor in the rise in the number of complaints, but it is still disappointing to see."

"There are many different retail outlets that sell PPI, but from the banks' perspective, they invest a great deal of time in training their staff and if a customer feels they have been sold a policy inappropriately, they should contact their bank."

"The key features of the cover are made clear before the customer commits to taking out a policy and a bank should never make taking out a PPI policy with it a condition of agreeing a loan. It will always set out the separate costs of the loan and of PPI."

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