THE organisation representing British bankers has said it understands why the Financial Ombudsman Service is recruiting 1,000 new staff to deal with mis-sold loan insurance.
The ombudsman announced this week that it needed the extra help to help it cope with the number of complaints it was receiving about mis-sold payment protection insurance (PPI).
Responding to the news, a spokesman for the British Bankers’ Association said: “Banks are committed to handling PPI complaints as efficiently as possible and have staffed-up to manage the complaints process.
“Given the high levels of complaints being made and the backlogs that the FOS is experiencing, we recognise the need to resource the FOS appropriately.
“All of the UK’s high street banks have committed publicly to ensuring a decisive end to any bad practices which resulted in mis-selling. Banks are overhauling their incentive structures for frontline staff, rewarding staff for high levels of customer service and not sales volumes.”
The Financial Ombudsman Service steps in to cases where the bank cannot agree a settlement, and last year had to increase the number of case workers by 1,000 to 2,500.
Britain’s banks have already set aside more than £12bn to compensate customers who have been mis-sold payment protection, but are struggling to cope with a backlog of complaints. Some industry insiders believe the final figure for compensation could be more than £25bn – a figure which has continued to rise over recent months.
The ombudsman has taken on 385,000 new cases since last April, including a record 245,000 cases relating to the mis-selling of PPI policies, which were meant to protect borrowers who found themselves out of work through sickness or redundancy but were often sold to customers who did not want or need them. Deputy chief ombudsman Tony Boorman said: “It’s disappointing that we’re still seeing significant numbers of unresolved disputes about mis-sold policies being referred to the ombudsman.”
Earlier this month, the Co-operative Bank was fined by the Financial Services Authority (FSA) for delaying valid PPI compensation claims in 2011. The authority said it was likely the bank had been holding on to a significant proportion of 1,629 complaints while it waited for the outcome of a judicial review into PPI. Issuing a fine of £113,300, the FSA said it had made clear to the industry that many claims should continue normally while the review was taking place. Although none of the complainants suffered a financial loss as a result, they did have to wait longer to receive their compensation. The Co-op admitted it had not lived up to its reputation for “doing the right thing” by customers, but said it was confident the delays would not be repeated.
Figures released by the Financial Services Authority in late 2012 showed that more than £7bn in mis-sold PPI had been paid back to customers in just over 18 months.
However, investigations into the mis-selling of PPI and awards of compensation to those who were victims have led to a rise in the number of bogus claims, as well as a surge of companies making cold calls and sending text messages to try to find people who wanted to make a claim.
In December, complaints about a company based in India which sent text messages about PPI and compensation for accidents were upheld by the Advertising Standards Authority (ASA).
It said Data Supplier, based in Mumbai, did not respond to its inquiries and appeared to disregard the authority’s code of practice.
The Financial Ombudsman Service is increasing the fees it charges financial services firms when cases are referred to the ombudsman, from £500 to £550. Additional fees charged on cases relating to PPI will remain at £350.