Banks failing to investigate PPI complaints

The Financial Ombudsman Service is receiving up to 2,500 complaints a week about payment protection insurance as some banks refuse to handle the claims.

The Ombudsman said while many businesses were continuing to handle complaints as normal, some banks had decided to put them on hold until the outcome of a judicial review was known.

The legal action was launched by the British Bankers' Association in October, challenging new rules on handling PPI complaints that are being introduced by the Financial Services Authority.

At the time, the Ombudsman said it would continue to handle PPI claims as usual until the outcome of the review, which is scheduled for January, is known.

But it said some firms had decided not to respond "substantively" to many PPI complaints until the legal position was clearer.

It said under these circumstances, consumers could still refer their complaints to it, but only once they had given banks eight weeks in which to respond.

The Ombudsman said: "The increase in PPI cases referred to us by consumers, where the businesses involved have not set out their conclusions on the complaints by the end of that eight-week period, means the rate at which we can settle these cases is now slowing down."