Complaints over PPI rise sharply

The Financial Ombudsman Services (FOS) received 50,378 new consumer complaints in the three months to December 2010, up 5.5% on the previous quarter, with complaints about payment protection insurance (PPI) rising 17% to 24,955. It takes the number of PPI complaints made during the first three quarters of the FOS's current year to 59,795 – already outnumbering (by some 10,500) the total for the year to March 2010, when 49,196 complaints were made. Complaints about current accounts and credit cards, the two next largest areas, fell (to 5,108 and 4,087 respectively) in the final quarter, but there were marginal increases in complaints about residential mortgages (1,829) and car and motorcycle insurance (1,422). The number of complaints upheld by the ombudsman in its last quarter has remained reasonably static, with 53% resolved in favour of the consumer compared with 52% in the previous two quarters. A total of 50% of complaints were upheld in the previous year. Last month the British Bankers' Association (BBA) announced it was launching a judicial review over how new Financial Services Authority (FSA) rules require PPI providers to explain to potential customers the key features of a policy, rather than just giving them a document with the information. Providers will also have to be able to show that they made clear that the cover was optional. Banks claim it is unfair to apply the new standard retrospectively, to policies sold before it came in. They claim that under the new regime a consumer will be able to claim they were mis-sold a policy if the bank cannot provide evidence that they were talked through its features, even though banks were not required to do this when the policy was sold. The FOS said the new rules on PPI would not yet have flowed into its current complaints data as there is always a time lag, but it didn't rule out increased claims occurring further down the line. The ombudsman also highlighted complaints about home contents insurance as it released. Around a third of such complaints the ombudsman sees each year are about items that need to be repaired, replaced or settled in cash. It said it frequently sees complaints where the insurer has agreed to settle a claim, but not in a way that the consumer considers appropriate. One consumer complained to the ombudsman recently after being mugged for a £7,400 designer watch that his insurer said they could not pay more than £1,500 for because the policy rules stated there was a "single item limit of £1,500". The consumer complained that the policy schedule wording gave the impression he had unlimited cover, to which the insurer said he should have read the schedule as well as the policy booklet "to get the full picture". The ombudsman ruled in his favour, stating that the insurer's wording was misleading and ordered the insurer to pay the full value of the watch. A spokesman for the ombudsman said if any consumers are unsure as to what their home contents policy covers, they should speak to their insurer before anything happens rather than be caught out at the claims stage.