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ombudsman news

issue 98

November/December 2011

PPI - still the big issue

In my foreword to an edition of ombudsman news earlier this year, I said that planning for the impact on our workload of payment protection insurance (PPI) complaints was one of the biggest challenges ahead of us.

At that time we were expecting to see a short-term fall in the number of these complaints being referred to us. The quarterly statistics we published last month did indeed show a drop in the number of new PPI cases we received in July, August and September. The figures also showed that during this period we upheld nine out of ten PPI cases in favour of the consumer. This reflected what happened over the summer - after the High Court had rejected the banks' legal challenge and the banks started settling their backlog of these cases, in line with our long-established approach and in accordance with special timetables set out by the FSA.

In the last couple of months, however, the number of new PPI cases being referred to us has climbed steeply - from fewer than 1,000 a week to over 3,000. This means we'll soon be getting our 300,000th PPI complaint. These numbers are pretty unsettling for us. In the interview with our chairman, Sir Christopher Kelly, in this issue, he identifies the operational uncertainties around PPI as one of the biggest ongoing challenges facing us over the next few years.

So it's hardly surprising that the impact of PPI came up as an issue for debate recently, at a meeting with a group of senior industry representatives at our industry funding forum. The meeting was part of the informal exchange we have with key stakeholders to discuss complaint trends, workload assumptions and budget projections in the lead-up to our formal consultation on our plan and budget early in the new year.

These industry representatives acknowledged that the banks and other financial businesses had already received a million PPI complaints from consumers this year - with at least the same levels likely next year. It was unclear what direct impact this would have on the ombudsman service - in terms of the numbers that would subsequently be referred to us by consumers unhappy with the way the businesses concerned handled their complaints. A significant part of this debate concerned the impact of claims-management companies - who now represent consumers in over 80% of the PPI complaints referred to us.

A better understanding of the numbers and issues around PPI is crucial to our ability to plan ahead efficiently and gear up our operations for next year. For us, this isn't just a question of the volumes and flow of cases. It's also about how well (or otherwise) the banks and other financial businesses, as well as the claims-management companies, will themselves have dealt with those cases that are subsequently referred to us to sort out and settle.

If all this means we'll need significantly more resource and capacity to handle ever-higher numbers of PPI complaints, then we need - now - to build this into the plan and budget we'll be consulting on in the new year.

The High Court ruling in April gave us legal finality on the approach that businesses should take on PPI complaints. But it certainly hasn't given us operational certainty on what complaints we can expect to see at the ombudsman service - how many and when. I'd be interested in hearing your views on this, as the consultation on our budget and workload moves forward.

Natalie Ceeney
chief executive and chief ombudsman

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ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.