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PPI claims headline FOS complaints. The good, the bad and the ugly!

The Financial Ombudsman Service [FOS] has just released the latest six-monthly complaints data (relating to the period 1 July and 31 December 2013) in respect of individual financial businesses – including the high street banks and biggest insurers. The data highlights the good, the bad and the ugly!

The good

Certain banks have previously been criticised for delaying financial claims by referring the legitimate claims to FOS. The bank’s critics relied upon the unacceptable percentage of resolved complaints the ombudsman upholds in the consumer’s favour against various banks. The suggestion of malpractice was driven by the fact that certain banks had significantly worse consumer uphold rates than other banks. Some banks have turned round their performance. For example, in the last reporting period (1 January 2013 to 20 June 2013), 90% of the Payment Protection Insurance [PPI] complaints against Lloyds TSB Bank Plc were found in favour of the customer. The figure in the results to 31 December 2013 for Lloyds Bank PLC is 59%. Although there is still room for improvement it is clear that Lloyds have made a significant effort to improve. Similarly Bank of Scotland plc, despite topping the table for new complaints in respect of mortgages and home finance, reduced the same percentage from 87% to 44%.

The bad

Despite the positive improvement by some banks in respect of PPI complaints others are still out of touch. One has to ask, why are 81% of Barclays Banks PPI complaints being upheld in favour of the customer? The only logical conclusion is too many legitimate complaints are still being unnecessarily referred to FOS. The same allegation can be made against Blackhorse (81%), CT Capital plc (93%), First plus Financial Group plc (73%), Legal & General Partnership Services Limited (89%), MBNA Limited (80%), Ocean Finance and Mortgages Limited (78%), Pinnacle Insurance plc (91%) and Progressive Credit Limited (97%). Clearly such high percentages of cases upheld in favour of the customer show that something is systemically wrong with the product providers complaint assessment processes. In the words of FOS, “far too many cases uphold rates remain stubbornly high, highlighting the need for financial businesses to do more to demonstrate their longer-term commitment to listen to customer’s concerns as they seek to rebuild trust.”

The ugly

Last month FOS issued their annual plan and budget consultation document which assessed its 2014/2015 income needs. The proposals were based on an assumption that there will be a 50% reduction in the number of cases it receives (a reduction from 6,000 per week to 3,000 per week). However, these figures show that the ombudsman received a record 575,836 new cases in total in 2013 – this was an increase of over a third (38%) on the previous year (2012). On the current evidence, the ambitious comment in the FOS January/February 2014 Ombudsman News, “I am pleased to say, though, that over the next year or so the prospect of putting PPI behind us will get closer.” seems more than a little premature and optimistic. Onlookers are beginning to suggest that the FOS proposal to freeze the levy and standard case fee and to reduce the PPI supplementary case fee to zero is misguided and premature.

Going forward:

The PFCA calls to refocus – Key priorities for FOS over the next 12 to 24 months should be:

  • Reduce the still significant backlogs in PPI cases
  • Deliver consistent quality in respect of outputs, including decisions
  • Hold 3rd parties to account within defined response times and take action to enforce such response times
  • Ensure effective/regular updates to complainants and those who represent complainants
  • Work with product providers and those who represent complainants to narrow the issues and establish protocols for both sides to agree cases that should and should not be escalated to FOS, in an attempt to keep the numbers going to the FOS to a minimum
  • Develop electronic processes to ease the costs and burden of administration
  • Improve general communication and collaboration.

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