Record numbers complain about payment insurance

Record numbers of customers are claiming they have been missold personal payment protection (PPI), the discredited insurance taken out to guarantee instalments for mortgages, loans and credit cards.

The number of PPI cases taken on by the Financial Ombudsman Service (FOS) surged by 50 per cent from 1,499 in January to a new high of 2,238 last month, making it the most complained about area of personal finance.

The FOS, which released the figure yesterday, expects the number of complaints to rise sharply in coming months once customers have failed to obtain a satisfying solution from their insurer, which they must do before submitting a complaint to the dispute resolution service.

Campaigners have been urging people to reclaim PPI as a result of rampant misselling in the past, which the Financial Services Authority has sought to stamp out with fines of up to £1m on 12 financial institutions, including HSBC's HFC Bank. Although PPI can be a sensible precaution for people worried about losing their job or falling ill, campaigners estimate that as many as half of the 20 million policies currently in force, £10bn worth, may have been missold by salespeople, many working on a commission basis.

First, potential borrowers were often told – wrongly – that they would not be able to take out loans unless they also took out a PPI policy. Secondly, many policy-holders could never have claimed because they were self-employed or had a pre-existing medical problem.

Generally, PPI pays back to consumers only 20 per cent of premiums, far less than other forms of insurance. Home insurance pays back about half of its income, car insurance returns about 80 per cent.

The campaign opens a second front in the mass revolt against overcharging by financial institutions, which has been championed by The Independent. Hundreds of thousands of bank and building society customers have claimed back up to £30,000 for current account penalty fees for bouncing a cheque or going over an overdraft limit.

However, almost all claims have been put on hold pending the result of a High Court test case on the legality of the charges, brought by the Office of Fair Trading against seven high street banks and the Nationwide Building Society. A ruling from the judge, Mr Justice Andrew Smith, is not expected until next month.

When the ruling is made, the banks or the OFT are likely to become bogged down in further legal wrangling, which could postpone settlement of existing claims for months or even years.

The OFT estimates that current account providers make between £2bn and £3.5bn a year from penalty charges, much less than the £5bn collected by the PPI industry, suggesting that the PPI revolt could dwarf the bank charge campaign.

Websites and are urging people to check whether they have the policies and complain – if appropriate – using forms published on their sites.

Doug Taylor, the personal finance campaigner at Which?, said: "Which? has identified in the past a series of misselling problems with PPI and we welcome the fact that many customers are taking action to recover misselling. However, this is the tip of the iceberg and we are anticipating that the campaignwill increase and more and more cases will go forward in the future."

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Digital Optimisation Executive - Marketing

    £30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

    Recruitment Genius: Financial Reporting Manager

    £70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

    Recruitment Genius: Payments Operations Assistant

    £23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

    Recruitment Genius: Telephone Debt Negotiator

    £13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

    Day In a Page

    Sepp Blatter resignation: The beginning of Fifa's long road to reform?

    Does Blatter's departure mean Fifa will automatically clean up its act?

    Don't bet on it, says Tom Peck
    Charles Kennedy: The baby of the House who grew into a Lib Dem giant

    The baby of the House who grew into a Lib Dem giant

    Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
    Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

    The harrowing testament of a five-year-old victim of Syria's endless civil war

    Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
    The future of songwriting: How streaming is changing everything we know about making music

    The future of songwriting

    How streaming is changing everything we know about making music
    William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

    Recognition at long last

    Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
    Beating obesity: The new pacemaker which helps over-eaters

    Beating obesity

    The new pacemaker which helps over-eaters
    9 best women's festival waterproofs

    Ready for rain: 9 best women's festival waterproofs

    These are the macs to keep your denim dry and your hair frizz-free(ish)
    Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

    Wiggins worried

    Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
    Liverpool close in on Milner signing

    Liverpool close in on Milner signing

    Reds baulk at Christian Benteke £32.5m release clause
    On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

    On your feet!

    Spending half the day standing 'reduces risk of heart attacks and cancer'
    With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

    The big NHS question

    Why are there so few new GPs when so many want to study medicine?
    Big knickers are back: Thongs ain't what they used to be

    Thongs ain't what they used to be

    Big knickers are back
    Thurston Moore interview

    Thurston Moore interview

    On living in London, Sonic Youth and musical memoirs
    In full bloom

    In full bloom

    Floral print womenswear
    From leading man to Elephant Man, Bradley Cooper is terrific

    From leading man to Elephant Man

    Bradley Cooper is terrific