The number of complaints against UK banks and financial institutions, have increase by 21% as compared with the previous six months according to the Financial Services Authority (FSA) which received more than 12,000 complaints a day in the second half of 2011, a large proportion of which were related to mis sold payment protection insurance or PPI.
According to figures released by the FSA, complaints about mis sold PPI rose by 85% to just under a million, in the same period.
What is Payment Protection Insurance
Payment protection insurance, also known as PPI is a type of insurance cover that is supposed to cover borrowers’ loan/creditcard repayments if they fall ill or lose their jobs and are unable to make their contractual monthly repayments.
But industrialized mis-selling of the insurance product, which generated an estimated £4billion per year in profits for the banks, became common practice and many who did not want it, need it or were eligible for it were convinced to purchase it.
The banks are now being flooded with PPI claims for compensation and have agreed a compensation bill, which could cost them over £10billion over the coming years. The FSA to has now granted them more than the usual eight week limit to deal with the backlog of historic PPI complaints cases.
Claiming Back PPI
The FSA figures also suggest that four out of five PPI complaints are coming via PPI Claims Companies who are actively advertising on the television and in the newspapers, in order to raise awareness and encourage borrowers to reclaim their money.
The number of claims settled in favour of the borrower, also increased in the second half of the year, with £2.1billion being paid out to customers who had been mis sold PPI.
Richard Lloyd, chief executive of the consumer group Which?, said: “The complaints data is evidence that some banks are still failing to treat their customers fairly when things go wrong… The increase in PPI complaints further demonstrates just how widespread PPI mis-selling was. We now need to see the banks take action and deal with these complaints quickly and efficiently and the FSA must take action against anyone dragging their feet settling complaints.”