Saturday, 14 May 2011

There will still be losers in the PPI debacle.

The banks' decision not to fight the court ruling on the way they handle payment protection insurance (PPI) complaints is good news for the hundreds of thousands of people who were mis-sold PPI. It's up to the banks to show they can get on and deal with their complaints speedily and fairly.

However, there is one group of people who won't be helped by the court decision - those who've already complained to their bank about a payment protection insurance policy, who had their complaint rejected but who didn't then take their complaint to the free Financial Ombudsman Service.

Under the rules, you have six months from when your bank (or other financial firm) rejects your complaint to take it to the Financial Ombudsman Service. But we know that before the Financial Services Authority told banks to buck up their ideas about how they dealt with complaints about PPI (which happened last August) banks were rejecting PPI complaints that were valid.

Across the financial industry 60% of complaints about PPI have been rejected. But the Financial Ombudsman Service has been finding in favour of consumers in 75% of PPI cases over the last three years. We also know that two thirds of those who had their complaint about PPI rejected by their bank didn't take it any further.

The rules say that you have six months from when your complaint was rejected by your bank to get in touch with the Financial Ombudsman Service. Once that deadline passes you can't complain to ombudsman (except in limited circumstances, such as you weren't told about your rights to go to the ombudsman or you were seriously ill).

Of course, it's ultimately the consumer's responsibility to take their complaint to the Financial Ombudsman Service, but I know that many people didn't do so because they believed their bank. If their bank rejected their complaint, why would someone else say anything different?

That means that thousands - possibly tens of thousands - of people who were mis-sold payment protection insurance and whose complaint was wrongly turned down by their bank can't go back and put in their complaint again.

The banks are being forced by the Financial Services Authority to contact hundrds of thousands of people who were sold PPI but who've not yet complained and to find out if they were wrongly sold a PPI policy. But there's no obligation on them to go back contact people whose complaints they rejected to see whether there was a justified complaint. Of course, there's nothing to stop them from doing that. The question is, will they?

1 comment:

  1. That's an interesting final question you raise Sarah.

    I wonder what the outcome will be? If the banks can avoid a payout I am sure that they will.