PPI complaints to ombudsman soar as banks fail to deal with claims

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Natalie Ceeney, chief ombudsman: 'Too many financial businesses still seem unable to sort out problems themselves.' Photograph: Anna Gordon

Consumers complained to the Financial Ombudsman Service (FOS) in record numbers last year, as the fallout from the payment protection insurance (PPI) mis-selling scandal continued and financial services customers became more aware of their rights.

In its annual review, published on Wednesday, the FOS said it had received more than 2m inquiries and complaints from consumers about a range of financial problems – more than 7,000 each working day. It investigated a record 508,881 - an increase of 92% compared with the previous year.

The FOS said it investigated 378,699 cases concerning PPI, after complaints that banks had failed to deal with claims properly doubled.

The organisation, which settles disputes between consumers and financial businesses, said PPI claims accounted for almost three-quarters of its workload in 2012-13, suggesting the mis-selling scandal that has haunted UK banks in recent years is far from over.

The highly profitable PPI policies were sold by banks to people taking out loans and credit cards to cover repayments if they lost their job or were ill. They rarely paid out, and have resulted in a blizzard of mis-selling claims costing billions of pounds.

The FOS said there were signs that banks were fighting more PPI claims than previously. The proportion settled in favour of consumers by the FOS has fallen to 70%, from 84% last year, bringing the overall proportion of cases in which the consumer won compensation as a result of its intervention below half for the first time.

The increasing number of households in financial difficulty has also played a part in the big jump in all kinds of cases.

Natalie Ceeney, chief ombudsman, said: "We have seen a much stronger consumer voice in the last year - with people becoming more aware of their rights and less willing to put up with poor customer service. As levels of confidence in financial services have eroded, it is disappointing that we still haven't seen any significant improvement in complaints handling. Too many financial businesses still seem unable to sort out problems themselves, without the ombudsman having to get involved."

The big four banks accounted for 62% of all complaints the FOS received, up from 52% last year. The ombudsman said the campaign to tell PPI claimants they didn't need to pay someone to make a complaint on their behalf had resulted in a 12% reduction in the number of complaints brought by claims managers.

Elsewhere, there was an84% rise in complaints to FOS about payday loans compared with last year. Investment Isa complaints rose 69%, while disputes about private medical insurance jumped by 85%. A fifth of people who brought a complaint to the ombudsman said they had a disability, it revealed.

Richard Lloyd, executive director of the consumer group Which?, said the figures showed banks were still letting their customers down: "The Financial Conduct Authority must take tough action against any bank found dragging its feet in settling complaints. It's time for a big change in banking, with banks that work for customers, not bankers."