Consumer PPI victories decline

The number of payment protection insurance (PPI) complaints being resolved in favour of consumers has fallen sharply, according to the latest figures from the Financial Ombudsman Service (FOS).

While complaints about mis-sold PPI policies rose to 30,301 in the last three months of 2011, an increase of 57%, just seven out of ten cases were settled in favour of the consumer over the same period. The FOS ruled in favour of complainants in more than nine out of ten cases in the previous three months.

The FOS said the spike in complaints being resolved in bank customers’ favour in the three months to the end of September last year was partly down to the withdrawal of a legal challenge on PPI being dropped the British Bankers’ Association. Many cases that had already been submitted to the ombudsman were then settled by banks before proceedings could begin.

Although the number cases being settled in favour of bank customers fell in the final quarter of last year, it was higher than the 66% success rate recorded throughout the 2010-11 financial year as a whole.

While the amount paid to consumers who the ombudsman finds in favour of can vary considerably, average payouts are around £2,750. In some cases a complainant’s compensation can run to tens of thousands of pounds, according to the FOS.

PPI complaints currently account for 54% of the ombudsman’s workload and considerably outnumber all other types of complaints it receives. Credit cards, current accounts and mortgages between them only accounted 18% of all complaints received by the FOS in the last three months of 2011.

Responding to a question about the number of PPI claims the FOS receives, Natalie Ceeney, chief ombudsman, wrote in the latest Financial Ombudsman Service newsletter:  “The challenges of our PPI workload are unprecedented. The number of new complaints about mis-sold PPI that we are assuming we will receive in 2012/2013 – 165,000 – will account for around 60% of our new cases next year. But we could receive a significantly higher or lower number than this – and there is considerable uncertainty about the volume of these cases in future years.

“Initial feedback from stakeholders suggests that most believe we will continue to receive substantial volumes of PPI complaints for another two or three years. This seems a sensible basis on which to plan, given the size of the PPI market (with up to 6.5 million policies bought annually), the number of PPI complaints (1 million) made direct to banks and other financial businesses last year alone, and the potential extent of detriment to consumers.”