PPI claims becoming less likely to succeed

Credit: Drozd Irina/Shutterstock.com

The FOS' data also revealed the biggest offenders when it comes to complaints in general, with the Bank of Scotland being followed by Lloyds Bank, Barclays, HSBC, Capital One, and Santander.

The Bank of Scotland - owned by Lloyds Banking Group - attracted a whopping 20,541 complaints in the six months to June, although only 22% of these are upheld.

And given that only 24% of the PPI claims made against the bank were upheld, the data show that while the recent Financial Conduct Authority (FCA) deadline on PPI claims may encourage greater numbers of customers to lodge complaints, most of these apparently won't be successful.

Changes

Perhaps most striking of all the data's revelations was that PPI claims had increased compared to the final six months of last year, rising by 16.5% from just over 76,000 to almost 88,553 complaints.

Yet what hasn't risen is the success rate, with the PPI claim success rate being 51% on average for all financial institutions in H2 2016, and 47.8% for the Big Four: RBS (inc. Natwest), Barclays, HSBC, Lloyds Bank (inc. Bank of Scotland).

By contrast, the success rate for all financial businesses is now only 41%, while for the Big Four it's now 38.6%, representing a drop of more than 10%.

This is a fairly dramatic decline, and in this context it's interesting to note that the FCA first announced their deadline for PPI claims in March, right in the middle of the six-month period the FOS have just reported on.

More interestingly, the FCA launched a nationwide ad campaign last week featuring none other than Arnold Schwarzenegger, so it's likely that claims numbers will only increase in the coming months as more people become aware of the deadline.

And as the date of August 29th 2019 looms, it's just as likely that the claims success rate will only sink further as more people make claims.

Rising further

On the one hand, this is because arguably unscrupulous claims management companies (CMCs) will potentially encourage people to make claims when they perhaps don't have a very strong case, given that such firms will be eager to make the most of an endangered cash cow that's already earned them in excess of £5 billion.

Yet on the other, it's also because the increased volume of cases being heaped on the FOS will make it likelier that they spend less time on each individual case, and that in their rush their default position may be to come down in favour of the banks.

This is made likelier by how the FOS handles cases by seeking evidence and answers from the banks, who in light of the immense expense they've had to face because of the PPI scandal will become more resistant to awarding compensation as the deadline nears.

They've been incredibly shy about awarding PPI money in the past, so if the FOS does give more credence or weight to their testimony as a result of being overstretched for time and resources, it's quite possible that the proportion of successful claims will shrink still further.

Bank of Scotland

Then again, it's still too early to say by just how much PPI claims will increase, with the chief ombudsman and chief executive of the FOS, Caroline Wayman, making the following comment:

"The FCA has just launched its communications campaign ... While we still don't know what impact this will have on our workload, today's data shows that PPI complaints are already increasing."

Yet once again, what's more certain about the FOS' figures is which banks exactly are the worst for PPI claims, as illustrated below:

Source: Financial Ombudsman Service, Complaints data, Jan-Jun 2017

Standing at the summit of this table are the Bank of Scotland, who despite operating only in Scotland, accumulated over 2,000 more complaints than Lloyds Bank and over 9,000 more than Barclays.

Yet once again, the fact that only 24% of the claims made against them were successful shows how putting a premature end to claims may also be unjust, especially when the rush to make claims in the next couple of years could make them more unlikely to succeed than they already are.