Payment protection insurance complaints soar

The Financial Ombudsman Service (FOS) said it has now received a total of 114,478 consumer complaints in the past five years over payment protection insurance (PPI).

Over half of these have been received in the past 16 months, with numbers reaching record levels each week.

The latest figures come as the Financial Services Authority (FSA) confirmed reforms to protect consumers in what has become one of the UK's biggest mis-selling scandals of recent years.

The FSA said the measures – which come into force on December 1 – were designed to "mend a market that has been broken for too long".

Its new rules include a handbook to ensure complaints are handled properly and an open letter setting out common sales failings to help firms identify bad practice.

The FSA has so far taken action against 24 firms and handed out nearly 13m in fines for PPI failings.

PPI covers debt repayments if the holder is ill or loses their job, often sold alongside personal loans, credit cards and mortgages. But bad sales practice in the sector and the cost of premiums have seen PPI become the single most complained about product to the FOS.

It said it received 21,417 complaints since April 1 – up almost 60 per cent on a year earlier – with 1,896 in the past week.

PPI sellers reject on average around half of all complaints they receive, but around 30 per cent go on to the FOS where 81 per cent are overturned in the consumer's favour.

The FOS hopes the FSA's measures will see consumer complaints fall over time as firms deal with them better in the first place, although it said it is likely to take time for firms to train staff properly.

The Financial Services Consumer Panel urged firms to start handling complaints fairly before the December 1 deadline. "Consumers deserve to get an early Christmas present from firms and not have to wait until the new December 1 deadline," said vice chairman Kay Blair.

A number of major firms have pulled out of the market – including Lloyds Banking Group, which stopped selling PPI for loans, credit cards and mortgages across all its brands late last month.