It has been another busy year for The Financial Ombudsman Service (“FOS”), one dominated by consumer complaints about payment protection insurance (“PPI”) mis-selling.
It’s probably not surprising to now learn that PPI is now the most complained about financial product in the FOS’s 12 year history, now exceeding even the financial bête noire of the 1980s, mortgage endowments.
The FOS’s latest annual review, published on 22 May 2012, shows a 28% increase in formal disputes. That equates to over 264,000 new cases, 157,000 of which related to PPI sales, 60% of total customer complaints to the FOS. The FOS is so inundated with PPI complaints that it has to take on an additional 150 staff each month to effectively manage and process the complaints. And to fund this the FOS is now charging businesses with over 25 PPI cases a year a supplementary case fee of £350 for each PPI case referred to it from April 2012.
But in welcome news for the banks and building societies there is a “but”, and a very big but at that, to all of this.
Although 82% of the PPI complaints have been upheld by the FOS, the FOS is increasingly concerned about spurious complaints. The FOS says these make up around 4% (over 6,000) of the total.
It’s fair to say that this is the product of people continually being badgered by claims management companies (“CMCs”), through text, by phone or media advertising, to make PPI complaints. Many of the CMCs were set up specifically to profit from the PPI gravy train.
Rather worryingly, the FOS says it is seeing an increase in complaints by consumers who have never even bought a PPI policy. That echoes the comments of the CEO of Lloyds Banking Group, Antonio Horta-Osario who said last week that one in four complaints that his bank had received had come from people who had never even bought PPI.
Chief Financial Ombudsman Natalie Ceeney has now added fuel to that fire by saying that while it is understandable for individuals to question whether they had a PPI policy, the FOS is “seeing consumers being very badly misled by claims management companies” and if a customer who had never bought PPI pays an upfront fee to a CMC that means the customers “are worse off than if they had done nothing”.
The FOS urges the CMCs to check the position before a compliant is referred to the FOS.
So is life getting harder for the CMCs, is their life blood being drained away?
Some financial institutions have offered compensation without the need for customers to complain about PPI. Others continue with their campaigns to encourage customers to complain without falling for the tender mercies of the CMC that certainly will (in circumstances in which some CMCs charge fees of as much as 40% of any compensation paid to the customer) leave the customer better off.
And the FOS is at pains to publicise that it is a free service for consumers and that its procedures are designed to be simple for consumers to use (without the need for a CMC).
In a welcome development the FOS’ has issued a veiled threat to the CMCs in the Annual Review; “if a [CMC] appears to be acting unreasonably, we refer these matters to the relevant regulator”.
And it now looks as if life could be about to get harder for CMCs who are guilty of improper conduct.
The Ministry of Justice, the CMC’s regulator, announced at the end of March that it had launched an investigation into CMCs, following a surge of complaints, an investigation that could lead to some CMCs losing their licences. Some commentators have criticised the MoJ as a “toothless tiger” so it will very much be a case of watch this space as the MoJ seeks to prove its critics wrong.
But it could also be a case of these various strands coming together to bring about a decrease in the number of PPI complaints to the FOS and driving the CMC gravy train into the buffers.