Campaigners have called for millions of rejected PPI compensation claims to be reopened after new research showed that banks had saved more than £4 billion in payouts.
Consumers dropped 2.4 million payment protection insurance claims between 2010 and 2012 after being turned down by their banks, the research found.
If they had gone on to appeal these cases with the Financial Ombudsman Service, more than 1.5 million would have been upheld. At the average payout rate of £2,750, these abandoned claims are worth £4.2 billion.
The research was conducted by The Times and FindMyClaims.com, a claims company, using published statistics and data obtained through Freedom of Information Act requests.
The handling of PPI complaints has come under scrutiny after serious failings were discovered at Lloyds Banking Group’s biggest redress operation. There are fears that banks have rejected large numbers of valid PPI complaints. Natalie Ceeney, the Chief Financial Ombudsman, said last month that customers had reacted angrily to suggestions that after being mis-sold PPI their subsequent complaint might not have been handled properly.
She said that, if the banks had adequate case-handling procedures and therefore upheld more complaints, the FOS would be deciding only a quarter of appeals in favour of consumers, rather than the three quarters it did.
The FOS is the independent body that adjudicates on disputes between financial companies and their customers. Consumers have six months to appeal against a rejected complaint to the FOS, after which they have to start again with their bank.
Gary Verschuur, founder of FindMyClaims.com, said banks should be forced to reassess all rejected claims between 2010 and 2012, reversing decisions where necessary or giving customers a second chance to appeal to the ombudsman. “The fact that [many] consumers didn’t exercise their right to appeal to the FOS on time does not outweigh the wrong perpetrated on them a second time by organisations they should have been able to trust,” Mr Verschuur said.
He added that claims companies did not need to play a role in such a process, saying: “I’m very much aware of my own industry’s reputation.”
Claims firms have been criticised for bombarding consumers with spam text messages, e-mails and phone calls, telling them to claim compensation for mis-sold PPI. They have also long been accused by banks of lodging fake claims.
In an apparent fight back, several claims companies have begun to lobby ministers, bankers and financial regulators to force banks to reopen huge numbers of PPI complaints that they believe were wrongly rejected.
Negar Yazdani, a partner at BlackLion Law and adviser to Lion Claimline, a claims company, said: “Banks continue to frustrate the process for making claims by sending complicated documents directly to [customers], providing misleading information or refusing to uphold legitimate complaints.”
The research found that between 2010 and 2012, 6.85 million PPI complaints were closed, of which 3.99 million were upheld by banks and 2.86 million rejected. Of the 2.86 million rejected claims, 468,000 were appealed to the FOS. The FOS decided 64 per cent, or 301,000, of these claims in favour of consumers.
About 2.4 million rejected claims were not appealed to the FOS. If these claims went to appeal, and were upheld at the average FOS rate of 64 per cent, then 1.54 million claims would have succeeded.