PPI complaints jump 57% to 30,301

The number of complaints about mis-sold payment protection insurance (PPI) received by the Financial Ombudsman Service jumped to 30,301 in the final three months of 2011.

This represents nearly a third of PPI complaints received last year, and is up 57% on the 19,259 recorded between July and October last year.

The latest increase means that in the year to date, the FOS has received 104,597 complaints.

More than two thirds (68%) of cases were resolved in favour of the customer between October and December, a drop from 92% in the previous quarter.

There were far more complaints about PPI than any other financial product - credit card accounts came second, with 4,032 complaints between October and December, followed by current accounts with 3,421 complaints. PPI now makes up over 50% of the FOS's cases, compared with just 2% of its workload five years ago.

Britain's biggest mis-selling scandal?
The banks have been forced to set aside billions of pounds to compensate customers for mis-sold PPI, a scandal that dates back more than a decade and could be Britain's biggest mis-selling scandal. The controversial insurance, designed to protect people from income loss from illness or unemployment, has been sold alongside mortgages, loans and credit cards since the 1990s.

At the start of this year, when the FOS published its annual budget it estimated it would receive around 145,000 new PPI cases in 2011/12.

Natalie Ceeney, chief ombudsman, wrote in the organisation's latest newsletter: "The challenges of our PPI workload are unprecedented. The number of new complaints about mis-sold PPI that we are assuming we will receive in 2012/2013 – 165,000 – will account for around 60% of our new cases next year. But we could receive a significantly higher or lower number than this – and there is considerable uncertainty about the volume of these cases in future years."

This could go on for another two or three years. "This seems a sensible basis on which to plan, given the size of the PPI market (with up to 6.5 million policies bought annually), the number of PPI complaints (1 million) made direct to banks and other financial businesses last year alone, and the potential extent of detriment to consumers," said Ceeney.

The FOS has also proposed new arrangements for charging financial businesses case fees. Its costs for handling PPI cases are significantly higher than the cost of handling other cases. It is therefore proposing a supplementary case fee of £350 (in addition to the standard case fee of £500) for each PPI mis-selling case that is referred to the FOS. But the fee will be chargeable only when financial businesses have more than 25 of these cases a year, reflecting where the costs are actually incurred in sorting out PPI mis-selling.