Problems over mis-sold PPI claims
A spot-check by the City regulator has revealed serious problems in the handling of PPI mis-selling complaints by many financial firms.
One operator has been referred for enforcement action and several others face further possible action after the review by the Financial Conduct Authority (FCA) found issues at 12 out of 18 companies.
The investigation, which covered smaller high street banks, building societies, credit card providers and personal loan companies, identified problems with complaint handling decisions and the way they communicated with customers.
The FCA also revealed that the total amount of PPI redress paid out in July was £528 million, up from £498 million in June and the first time this year that more than £500 million has been paid out in any one month.
The firms covered by today's review have so far paid £1.1 billion of the nearly £12 billion in total redress issued to consumers so far.
FCA director of supervision Clive Adamson said: " We expect firms to deliver fair outcomes to PPI complainants. In our review, we found that some firms are doing this while it is clear others still have some way to go."
The 12 firms whose practices were found to be not up to scratch account for one in 16 (6%) of all PPI complaints.
The regulator disagreed with three-fifths of cases, which they had rejected, and had concerns with the compensation offered in more than two-fifths of complaints, which they had upheld.
Even with the six firms which were found to be acting fairly, there was room for improvement. Of the complaints rejected by these firms, the FCA disagreed with less than 8% of their decisions and of the complaints they upheld, the regulator had concerns with their compensation offers in about one fifth (21%) of cases.
The FCA urged firms to do more to establish the "bigger picture" and work out what information the consumer had when they were sold the PPI policy, how it was sold and what their personal circumstances were.
Its review involved asking each firm to provide a sample of 50 PPI complaints, made up of 40 which had been rejected and 10 upheld.
It looked at whether complaint handlers were assessing the merits of complaints in line with guidance, whether offers of redress were fair and whether decisions were being given in a clear way.
Consumer campaigners said the only way people can be sure they will get a fair hearing over a PPI complaint is to take their case to the Financial Ombudsman Service, which resolves disputes between consumers and financial firms.
PPI is the most complained-about product the ombudsman service has ever seen and it has taken on 2,000 extra staff over the last two years to deal with the scandal and continues to take 2,000 calls a day from consumers asking for help over the issue.
Wendy Alcock, campaigns coordinator at MoneySavingExpert.com said: "This review looked at a limited number of firms, but the practices are likely to be replicated across the board.
"Our message continues to be that anyone who has a PPI claim rejected by any lender should not let that put them off. A rejection is only a rejection if it's from the Financial Ombudsman Service. It's the only place to get a fair hearing."
The FCA has also been probing how larger firms, including high street banks, handle PPI complaints, and will publish its findings at a later date.
The findings come after an undercover investigation by The Times newspaper found evidence of failures by Lloyds in the way it was processing PPI complaints at a handling centre.
Lloyds said at the time that it had taken immediate action and it believed the comments noted by the newspaper to be isolated.
Consumer group Which? called for the FCA to "name and shame" firms found to be fobbing customers off.
Richard Lloyd, Which? executive director, said: "This is further evidence that some firms are not dealing with PPI complaints properly and are fobbing off customers who have genuine complaints. People deserve to get back what they're rightly owed, with minimum hassle.
"We want the FCA to name and shame the firms who are not treating their customers fairly and follow up with tough action, including heavy fines, against anyone found breaking the rules."
The FCA said it is working closely with firms to make improvements to their complaint-handling processes and to help customers who may not have received the compensation they are due.
Across the industry, firms have now handled nearly 11 million PPI complaints and are also sending out some 3.5 million letters proactively to customers whom they have identified as being at high risk of having suffered a past mis-sale, but who have not complained.
The FCA said it expects all firms who deal with PPI complaints to take note of its findings.
It said: " We expect firms' senior management and boards to ensure they have clear ownership and effective oversight and control of PPI complaints to deliver fair and timely outcomes for customers."