PPI complaint handling – FOS referrals a wakeup call following LBG fine?
The PFCA calls for greater scrutiny of cases referred to the Financial Service Ombudsman [“FOS”]. The recent Financial Conduct Authority [“FCA”] financial penalty (£117,430,600) levied against Lloyds Bank Group highlights the fact that genuine Payment Protection Insurance [“PPI”] claims are still being rejected and the size of the fine highlights the level of consumer detriment.
Adopt three customer focused principles
Clearly the fine is (or should be) a wakeup call to the banking industry and the PFCA calls on all financial institutions to adopt three customer focused principles:
- Customers have a right to expect that they will be treated fairly in all interactions with a business, but particularly when they complain about a financial product bought through the firm.
- Complaint handling, and in particular PPI complaint handling, should be considered as a key consumer protection issue and treated as such at all levels within a business.
- Customers who have already suffered detriment should not suffer further detriment by not being allowed access to justice and the full redress they are owed.
All attempts to rebuild trust in the financial services sector will fail if these core principals are not adopted.
Rejection of genuine claims
Although the detail in the Lloyds fine decision notice is shocking, in isolation it is clear that the rejection of genuine claims remains a significant industry problem. FOS information shows that in the six month period ending December 2012, 60% of all PPI claims adjudicated by the service in that period were upheld in favour of the consumer. The industry managed only a slight improvement in the six month period ending December 2014 (57%). FOS uphold data highlights the fact that some product providers are worse than others when it comes to rejecting genuine claims. These are then referred to FOS only to be upheld in favour of the consumer some time later. FOS uphold data shows high level uphold percentages and/or no improvement over time within some major financial institutions.
PFCA claims data shows 41% at FOS for over 12 months
Of the claims referred to FOS by PFCA member firms 69% have been at FOS more than six months (resolving disputes within this period should be a reasonable goal) and the 41% have been at FOS over a year (anything greater than this period should be considered unacceptable). The most recent FOS annual report shows that around 250,000 PPI complainants are waiting for a FOS decision – a significant consumer detriment.
FOS delays cause further consumer detriment
The inappropriate rejection of genuine cases has wider consumer detriment implications than just the impact on the individual aggrieved customer (distressing as that might be for the individual customer). Where a case is wrongly rejected there is only one course of action (without the cost of litigation) and that is referral to FOS. But FOS can’t cope with genuine disputes let alone having to administer cases which should have been paid out without referral. Everyone knows, and FOS confirm it, “people are waiting longer for our answer than they – or we – feel is acceptable”. What probably isn’t known is the level of consumer detriment behind FOS delays.
The question is how does the industry help FOS?
Clearly the Lloyds fine and FOS data shows that the industry has to do more to settle genuine cases without the assistance of FOS, which will mean FOS can focus on solving their backlog, in particular aged cases.
FCA – Focus on the scrutiny of complaint handling
The PFCA calls on the FCA to take further steps and issue renewed guidance focusing on the scrutiny of PPI complaint handling and, in particular, rejection processes. The FCA Lloyds decision notice confirms the use of independent ‘skill person reviews’. Such reviews should become ‘industry norm’ giving regular oversight to processes which currently appear to be broken. It seems that ‘what gets measured gets done’ and truly independent reviews are required to help rebuild consumer trust.