The Independent

1,000 Britons a week complain about being mis-sold payment protection
By Nicky Burridge (The Independent)
Thursday, 8 July 2010

than 1,000 people a week are pursuing mis-selling claims about payment-protection insurance (PPI) after having their complaints rejected by the banks, the Financial Ombudsman Service (FOS) revealed yesterday. The ombudsman said it was receiving some 200 complaints every working day relating to the insurance cover from people unhappy with the way providers had dealt with their complaint.
The FOS had expected to receive around 46,000 complaints about PPI this year, but figures now suggest the total will be far higher than this.
The ombudsman has repeatedly criticised the banks and other PPI providers for the way they handle complaints, claiming many are failing to investigate them properly. The service is upholding more than 80 per cent of the complaints it receives about PPI, which is the single most complained-about product.
The FOS has typically called on offending firms to pay four-figure compensation sums to consumers, although in some cases the figure has been as high as £25,000.
Yet it is thought that tens of thousands of customers may be missing out on compensation because they fail to pursue their claims through the FOS. Figures from the City watchdog, the Financial Services Authority (FSA), show that firms received about 260,000 complaints from consumers relating to PPI during 2009, but only 41,000 were subsequently referred to the ombudsman.
PPI covers debt repayments if the policy holder is unable to work because of an accident, illness or if they lose their job. But the product has been criticised after research found it had been mis-sold to many who would never be able to claim on it, while others felt pressurised into taking it out with loans or credit cards.
Vera Cottrell, of the consumer group Which?, said: "Banks are wasting everyone's time by automatically rejecting so many complaints

When this newspaper began its campaign against excessive bank charges in February 2007 the financial world was a very different place. It was before the credit crunch; before the nationalisation of Northern Rock; before the unprecedented state bailouts of some of the most famous banking names on our high streets. In those carefree days, few of us had heard of sub-prime mortgages or collateralised debt obligations.

When The Independent began to encourage bank customers to demand that these charges be refunded, the likes of Lloyds TSB, the Royal Bank of Scotland and HBOS made billions of pounds in profits each year. Now all that stands between these banks and insolvency is the hand of the state.

Yet, despite this traumatic humbling, the banks continue to fight for their right to levy these charges, bringing their case before the House of Lords yesterday. Over the coming days, five Law Lords will rule on whether the Office of Fair Trading has the authority to decide if these charges are fair or not.

Should the fact that the high street banks have been brought low have any bearing on the outcome of this case? Expect the banks and their defenders to argue that it does. They will claim that removing this income stream (which before 2007 yielded the sector some £2.5bn a year) will hasten the end of "free" banking in the UK.

We can predict this because this is the tune the banks have been playing since this saga began. The alternative to allowing the banks to impose hefty penalties is, we are told, monthly account fees for all, of the sort that are levied on the Continent.

We should not allow such threats to be a distraction from what has always been the central issue. The basic objection to these charges is not that they make the banks too much money, but that they are unlawful. The law, as outlined in the 1999 Unfair Terms in Consumer Contracts Act, says that banks cannot impose charges for services that are in excess of what it costs them to provide those services.

But the level of these charges is not set to cover the costs to the banks of unauthorised overdrafts and the like. It does not, for instance, cost a bank £40 every time one of their customers goes unexpectedly overdrawn. Independent analyses suggest the true cost is less than a tenth of this. These are penalty charges and, as such, they are breaking the law.

The question of the banks' revenues is another matter entirely. If the banks want to impose account fees to maintain their profit margins, let them make the case for this on its own merits. It is, though, hard to see them getting a receptive hearing from their customers in the present climate.

The banking crisis, far from supporting the case for bank charges, emphasises the extent to which the financial sectors enjoy an implicit guarantee from the state when it overreaches itself. Commercial banks have a tendency to privatise profits in the good times and socialise losses in the bad.

Given the implicit – and, at the moment, explicit – state guarantee the banks enjoy, the case for allowing them to levy punitive charges looks weaker than ever. It is bad enough to be gouged by a private company. But coming from businesses that we - as taxpayers - are required to support, it is surely an insult too far.

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Banks have been given the right to appeal against a court ruling that could have seen more than £1bn in unauthorised overdraft charges returned to customers.

In a blow to The Independent's bank charges campaign, the House of Lords has ruled it is prepared to hear an appeal from seven banks and building societies who maintain the charges are not subject to a consumer law on fairness.

The decision overturns a ruling by the Court of Appeal that the banks should not be able to take their two-year battle against the Office of Fair Trading (OFT) to the highest court in Britain.

In February, the Court of Appeal upheld a High Court ruling last year that the charges fell under the 1999 Unfair Terms in Consumer Contracts legislation, as the OFT had argued. Campaigners had hoped one million people whose cases had been frozen pending the case outcome would soon receive a payout.

The institutions – Abbey, Barclays, Clydesdale, HBOS and Lloyds TSB (now part of the same group), HSBC, RBS and Nationwide Building Society – are waiting for a date for the hearing.

The OFT brought the test case in April 2007 after thousands of customers started demanding refunds for the charges. People who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 for a single bounced payment, although the cost to the banks could be as little as £2.50.

Prior to the case, banks had paid out £559m in refunds. Martin Lewis, the creator of moneysavingexpert.com, who has run a campaign against the charges, said: "It's time the banks gave up and paid out. Both the High Court and the Court of Appeal have already said bank charges are governed by fairness rules and the OFT has said it provisionally thinks charges are unfair."

The Which? personal finance campaigns manager, Doug Taylor, said: "It's outrageous that public money is being used to drag this saga out for even longer when the banks should accept the Court of Appeal's decision and draw a line under this issue once and for all."

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