PPI scandal sees rise in complaints to FOS

High street banks' responses disappointing consumers

by Russell Shackleford, 6th September 2011

The Financial Ombudsman Service has revealed that the PPI mis-selling scandal has seen complaints about banks in the first half of 2011 increase over 50% compared to the six months prior.

Almost 150,000 new cases of customer dissatisfaction arose in the six months leading up to June, of which a staggering 98,632 related to the understandably maligned Payment Protection Insurance, new figures released today have shown.

PPI is a form of loan insurance, intended to enable borrowers to continue repaying loans even if they should suffer a loss of income, which the high street banks and other financial institutions were found to have been systematically mis-selling to customers who had no use for the product and would not be able to claim on the policy. Some people were not even told that they were having an extra charge for the insurance added on to the total amount of their loan.

The vast increase in the amount of cases which went to the FOS was probably fuelled by the refusal of the banks to deal with any mis-sold PPI complaints while a judicial review was in progress earlier this year, in which the banks attempted to argue against any repercussions for their widespread mis-selling of the insurance and reject that the onus was on them to compensate customers.

After a crippling loss in the courts, the banks were forced to set aside billions in redress to wronged customers, but not before denying them even a response for months.

Lloyds Banking Group received the most complaints at the FOS, jumping from 18,977 in the last six months of 2010 to 32,590 in the first half of 2011.

The increased amount of discontented consumers was reflected in complaints received by the banks themselves, many of which have also reported vastly greater numbers of complainants this year.