PPI claims: Behind the scenes at the ombudsman

Financial Ombudsman Service The service has employed a host of staff to look into PPI claims

Related Stories

Compensation paid to customers who were mis-sold Payment Protection Insurance (PPI) since January 2011 now totals an eye-watering £14.7bn.

About one in 10 of these successful claims are not straightforward and end up with the Financial Ombudsman Service. In fact, more than a million consumers have sought help from the ombudsman just on PPI.

Anyone who thinks they have been mis-sold PPI is advised to first get in touch with the business that sold the policy. The company has to respond within eight weeks.

If the response is not what the complainant expected then the complaint can be taken to the Financial Ombudsman Service.

Most people call the service by telephone and normally speak to an adjudicator like Rummel Ullah.

In the majority of cases he and his fellow adjudicators can make a decision after seeing a complaint form, having received a response from the business, and having looked at all the relevant policy documentation.

What is payment protection insurance?

PPI is designed to help policyholders repay loans and credit card debts in the event of illness, accident, redundancy or death.

It was mis-sold to millions of people. Policies often did not pay out when people needed help. Many sales staff did not explain PPI properly, for example to the self-employed or those with pre-existing medical conditions who would never be able to make a valid claim.

Compensation claims have led to an average payout for millions of people, averaging just under £3,000 each. This is made up of:

  • a refund of premiums
  • interest paid on those premiums if they were added to the loan
  • and 8% for interest that would have been paid if claimant had saved the money instead

There are cases, though, which are appealed after the adjudicators' decision, or that are more complicated. These are passed on to an ombudsman.

Difficult cases

Steve Townsley is a senior financial ombudsman. When he receives a case he already has a lot of information.

"I try to sort it into three areas," he says. "There's the nice bit in the middle, which if you like are the facts - the stuff no one disagrees about - and to me that's almost the promised land, that's the safe ground that I know about.

"I then have what the consumers told us, and what the business has said in response."

He tells of a case in which a small business owner took out a loan. Subsequently, a complaint was made against the bank that sold it for two reasons: that staff did not explain sufficiently why PPI was needed, and that it was inappropriate for someone who was self-employed to be sold the product in the first place.

Mr Townsley says the case was not simple to resolve.

"The policy, which is in my facts pile, actually has some clauses which make it really difficult for self-employed people to claim. So my actual conclusion at the end was tough [to come to].

"[Yet] because of the terms of the policy, and the detail I've been able to go into, I can say that policy wasn't really suitable for that client. So I'm actually going to uphold this case and I'll award the consumer some compensation."

Steve Townsley Steve Townsley says that cases can involve many thousands of pounds

In this case the amount of compensation will be somewhere between £2,500 to £3,000. Mr Townsley says he has dealt with cases where compensation ranges from just a few hundred pounds up to tens of thousands.

The Financial Ombudsman Service has been kept busy by the PPI scandal. At the peak, it was receiving 12,000 calls a week. Now, it still receives 5,000 calls every week.

Not all these calls are from people who were mis-sold PPI when taking out a mortgage or opening up a new credit card. The ombudsman estimates that 5,000 to 10,000 calls it receives are appeals against retailers who have sold anything from a sofa, or a car, to double glazing, all on finance.

Claims firms

Despite the growth of claims management firms, Caroline Wayman, principle ombudsman, believes most claims can be made by the consumers themselves.

Start Quote

We've been really disappointed at how long it has taken financial businesses and, at times, claims management companies to really adopt the proper approach”

End Quote Caroline Wayman Principle ombudsman

"It's not difficult to make a claim directly, you don't need to use a claims management company, who are usually the ones sending those texts or being sent on behalf of," she says.

"If people want to use them, that's great but you don't need to. So my advice would be have a think. Think about whether you might have had a policy. Actually many people don't realise that they did."

There is also the small matter of the slice of your compensation you may have to give up to a claims management company. For example, in one case a PPI claim was worth £13,000 in total but in the end consumer only received £10,000.

The Financial Ombudsman Service has its critics too. Some have been frustrated at the delays in getting a decision. But Ms Wayman believes the blame is not entirely its fault.

"We've been really disappointed at how long it has taken financial businesses and, at times, claims management companies to really adopt the proper approach to these cases," she says.

"Clearly that really slows things down when there are these volumes. So we've obviously had to adapt ourselves and recruited a huge number of people."

In fact out of the service's 4,000 staff around half are employed solely on handling PPI complaints, which an ambition to make the claims process as fast as possible.

More on This Story

Related Stories

The BBC is not responsible for the content of external Internet sites

More Business stories


BBC Business Live

    TESCO 07:57: BBC Breakfast

    Steve Dresser from Grocery Insight tells Breakfast the biggest concern for Tesco investors is the possibility of more skeletons in the closet. "The real fear for the City is if they go further back in the accounts and realise this was an ongoing practice," he says.

    TESCO 07:52:

    What will the market reaction be to Alan Stewart's early start as Tesco's finance director? Shares fell nearly 12% yesterday, wiping off more than £2bn from the value of the company. We'll find out what happens in about ten minutes when the market opens.

    OIL PRICES 07:43: BBC Radio 4
    Oil pump jacks pump oil at Al-Jbessa oil field in Al-Shaddadeh town of Al-Hasaka governorate,

    Nick Butler, a former adviser to BP and a visiting professor at Kings College London, says the price of oil - already 15% lower this year - could fall to as low as $80 a barrel. He says Saudi Arabia could end up as one of the big losers. Saudi Arabia "will be squeezed" by other oil producing nations, he says. "They will be putting pressure on them to reduce production. Saudi Arabia could be forced to cut production to stabilise the price at perhaps $80, perhaps $85 a barrel."

    TESCO Via Twitter Simon Jack Business correspondent, BBC News

    tweets: After uncomfortable moments yesterday when Dave lewis was asked he had a CFO or not, Alan Stewart starts today. M&S release him 2mth early.

    TESCO 07:32: Kamal Ahmed BBC Business editor

    I am told that Alan Stewart's arrival came after a direct appeal from Dave Lewis to Marc Bolland who "graciously" allowed him to leave early.

    MOTHERCARE 07:25:

    Mothercare has announced plans to raise about £100m from investors. The company's chairman, Alan Parker, says the rights issue is a "pivotal step" and hopes it will return Mothercare's UK business to profitability.

    TESCO 07:23: Kamal Ahmed BBC Business editor

    The announcement that Alan Stewart is starting as Tesco's finance director today will bring some relief to investors. A business facing an accounting crisis with no chief financial officer was not exactly comfortable. Sir Richard Broadbent, the chairman, will hope that the move will quieten those who believe that he should consider his position.

    TESCO 07:17: BBC Breakfast

    Tesco's share price fell nearly 12% yesterday - that's £2.2bn off the value of the company. Kevin Doran from Brown Shipley tells Breakfast's Steph McGovern: "It's a significant fall because it's a permanent fall... this is a car crash happening in slow motion". He also says he would be "astonished" if this was the end of the bad news.

    A Jimmy Choo shoe

    Luxury shoes brand Jimmy Choo has confirmed its intention to float on the London Stock Exchange this morning. In a statement, chief executive Pierre Denis says the firm has "strong momentum" adding he is confident its future as a public company can only extend its reputation.

    TESCO 07:13:

    Here's a link to that (very short) statement from Tesco on Alan Stewart's arrival. The supermarket faced criticism after yesterday's revelations that it would be effectively running without a CFO for the rest of the year, had Mr Stewart started in December as originally planned. Will investors react positively to this announcement at the start of trading?

    TESCO 07:05: Breaking News

    Tesco has said this morning that its new chief financial officer Alan Stewart will join the company today. That's almost three months early.

    SUGAR Via Twitter Adam Parsons Business Correspondent

    tweets: "Tate and Lyle: Disruption to supply chain in first half of the year has cost business £40m"

    Rico Hizon

    Some apparently good economic news from China, according to World Business Report. Activity in manufacturing unexpectedly picked up in September according to the latest figures, even as factory employment slumped. Rico Hizon in Singapore tells the programme that it is a big relief for investors after a string of negative news out of China in recent weeks.

    TESCO 06:59: BBC Radio 4

    Ms Palmer of Begbies Traynor tells Today when Laurie McIlwee resigned in April "it was allegedly due to some certain differences of opinion" between former chief executive Philip Clarke and Laurie McIlwee. "So it could well be that this issue goes that far back."

    Oil well

    The Rockefellers - the US industrial family that made a fortune out of oil in the late 19th century, is going to sell its investments in fossil fuels and reinvent itself in clean energy, according to US press reports. Rockefeller Brothers Fund, founded by the family heirs, has signed a pledge to get rid of fossil fuel assets.

    TESCO 06:42: BBC Radio 4

    More from retail analyst Julie Palmer on Tesco. She says there has been "some concern over a period of time that the Tesco board just hasn't been strong enough". Tesco relies a lot on non-executive directors, she adds. It's also not clear how long former chief financial officer Laurie McIlwee has been absent from the company following his resignation in April.

    TESCO 06:38: BBC Radio 4

    It looks like Tesco has "recognised the acceleration of payments from suppliers for in-store promotions and bonus payments, while deferring costs relating to food that is out of date and stock theft", Julie Palmer of Begbies Traynor tells Today (whatever this means). But she says it's not clear if they have broken accounting rules.

    LISTEN AGAIN Via Twitter Adam Parsons Business Correspondent
    LABOUR CONFERENCE 06:24: Radio 5 live

    British Chambers of Commerce boss John Longworth says Ed Balls' speech at the Labour party conference yesterday marked a "paradigm shift" in Labour's approach to business. He tells Wake Up to Money a slew of policy plans including cuts to business rates, infrastructure plans and a decision on Heathrow expansion are all good news. Suggestions that Labour is anti-business, he says, are "behind the curve".

    RATES RISE? 06:18: Radio 5 live

    The Bank of England should raise interest rates straight away according to Jim O'Neill, the economist and former chairman of Goldman Sachs Asset Management. He tells Wake Up to Money: "there's no reason not to move right now", and more "conventional" rates will be appropriate for the recovering economy.

    BARCLAYS FINE 06:10:
    A Barclays sign hangs outside a branch of the bank in the City of London

    Ahead of its trading statement later this morning Barclays Bank appears to have found itself in some regulatory hot water again. the Financial Times reports the bank will later today be fined £38m for failing to keep client's money separate from its own at its investment arm. The fine, levied by the Financial Conduct Authority, would be a record for this type of misconduct.

    TESCO IN SOUTH KOREA 06:03: Radio 5 live

    Tesco's troubles follow it to South Korea, the BBC's Steven Evans in Seoul tells Wake Up to Money. Regulators there have opened an investigation into Homeplus - a local Tesco subsidiary with 400 stores. Allegations include the selling of customer data, and the suggestion that a BMW car, meant as a customer lottery prize ended up in the hands of a friend of the staff - so not related to Tesco's current UK problems.

    06:00: Edwin Lane Business reporter, BBC News

    There's also more on the Labour party conference, which continues today. Get in touch with us throughout the morning on bizlivepage@bbc.co.uk or on Twitter @BBCBusiness.

    06:00: Matthew West Business Reporter

    Morning folks. This morning we have a trading update from Barclays bank as well as one from Punch Taverns. We also learned of 1,700 job losses at Phones 4U overnight. There are the latest set of public sector finances to examine later on. And there's bound to be more on Tesco's accounting irregularities. Stay with us.



  • Peaky Blinders publicity shotBrum do

    Why is the Birmingham accent so difficult to mimic?

  • Oliver CromwellA brief history

    The 900 year story behind the creation of a UK parliament

  • Image of Ankor Wat using lidarJungle Atlantis

    How lasers have revealed an ancient city beneath the forest

  • TheatreBard taste? Watch

    Are trailer videos on social media spoiling theatre?

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.