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Mis-selling complaints hit record levels as FOS struggles to cope

Complaints from unhappy customers about banks and insurers are rising at a record rate says the Financial Ombudsman Service.

Complaints about the mis-selling of payment protection insurance (PPI) make up the largest part of the FOS’s workload. In the last three months of last year, the FOS received more than 30,000 complaints from customers whose grievances about mis-selling had been rejected by companies.

That represents an average of one new complaint for every minute of every working day. In roughly two-thirds of all PPI cases the ombudsman finds in favour of the complainant, and not the company.

The FOS says that it is now on course to smash last year’s record total of 206,000 complaints. By the end of March, the FOS expects to have received more than a quarter of a million new complaints – roughly 1,000 a day for every working day of the year.

New cases reported to the FOS rose by ten per cent for the last three months of the year, reaching almost 56,000.

The UK economy continues to bump along the bottom. Unemployment is now 2.68 million – almost eight-and-a-half per cent of the working population. It is expected to rise further this year, according to the Chartered Institute of Personnel Development. And with the cost of living rising by double the government target at 4.2 per cent, families are looking around to see how they can improve their situation.

That is why, in the run-up to Christmas, that claims soared, as families looked to find some extra cash. PPI complaints rose by 57 per cent compared to the previous three months.

But now the number of complaints is expected to rise further, as families often review their finances at this time of year. And it is PPI complaints that are the major cause of concern.

The FOS has now dealt with more than 300,000 complaints about mis-sold payment protection insurance (PPI. This was routinely forced on borrowers, despite many being ineligible to claim – for example through being jobless, self-employed or over 65 years of age.

Frustrated by the delays they face in trying to personally resolve their complaints against banks, more and more people are turning to claims management companies to help fight their corner. Eighty per cent of all complaints to the FOS now come from claims management companies.

The strain on the FOS caused by this rise in claims is proving expensive. Staff numbers are set to rise by one-third to deal with the increased demand for its services. However, at the same time, banks are luring away FOS contractors to work for them as claims adjudicators on PPI claims. The FOS plans to increase staff numbers by 35 per cent over the next year from 1,890 to 2,545.

The FOS says: “We have found it challenging to compete against the remuneration packages offered by some of those businesses. The higher levels of adjudicator turnover during 2011/12 have added to our recruitment and operational challenges.”

In the next financial year, staffing costs are expected to total almost £150 million. At the same time, the FOS budget is set to rocket by 75 per cent to more than £197 million. The FOS is funded by a mixture of case fees and a levy on businesses that are the subject of complaints. It is now having to review its funding model to cope with the demand for its services. Complaints have risen from about 25,000 in 2000, to the expected record of about 250,000 this year.

 

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