The PPI Claims Scandal
The storms and floods that have swept Britain seem to mirror the PPI claims scandal. You will remember that predominantly Banks, sold payment protection insurance to anyone with a credit card, loan or mortgage. On the face of it this seemed like quite sensible planning, but in practice, the insurance wasn’t worth having as for the majority of people it would never have paid a claim. Unfortunately the regulator was not responsible for this sort of insurance during most of the mis-selling. The Banks didn’t acknowledge a problem. It took a consumer champion (Martin Lewis) to get the Banks to admit a problem and begin addressing it. The scale is huge, probably far larger than anyone previously thought.
PPI Claims Companies
As a consequence, there has been a plethora of claims companies all offering to assist people with their claims. Indeed, this and my previous blog have been systematically targeted as yet another opportunity to push their services. Whilst I am fairly sure that a few of these companies are probably honest, the majority are nothing short of ambulance chasing opportunists with only their own interests at heart. Taking a lesson from direct marketing, they appear to believe that if you chuck enough muck, some of it will stick. Like most of you, I have had a social media bombardment – website, emails, text and phone calls assuring me that I have thousands of pounds to claim. I don’t. I didn’t have any PPI, neither did I advise any client to take any out. There is deliberate intent to simply encourage complaints in the belief that “nothing ventured, nothing gained”.
Wasted Resources – Jobs For Paper Pushers
Unfortunately, these practices have resulted in the Financial Ombudsman being overwhelmed, needing to recruit more and more staff to simply handle the volumes. Who pays for the FOS? well I do (advisers do). This means you do. This is a case of lose-lose. Very few advisers sold PPI, yet they are stumping up the costs. Today FOS announced that they increased their staff by 25% this year and may have to do the same again next year… paid for by? well you and me. As you may imagine, this has set off another spate of storms in the pink paper trade press today.
The 2011/12 annual review shows that FOS received 1,268,798 initial complaints. However only 264,375 turned into proper cases for complaint (19.4%). Some 201,793 were resolved by adjudicators and 20,540 actually resolved by ombudsmen. PPI complaints rose by 31% which amounted to 60% of all complaints and the highest number of complaints about any financial product or process ever. Over half of all complaints related to just 4 financial institutions, I dare say you could guess all four correctly. The cost to run FOS – well £108 million for the 1700 staff. That’s an average cost per capita of £63,500. My source? the FOS site Annual Review 2011/12.