Following complaints from lovemoney.com readers about the speed of payment protection insurance (PPI) compensation payouts, I decided to find out what's taking so long.
There have been substantial delays in compensation payouts for some people who were mis-sold payment protection insurance (PPI).
Back in February, we reported that banks had only paid out around a quarter of the total amount they’ve set aside for compensation up to the end of last year. This figure has now risen to £2.5 billion as of January, but is still well short of the estimated £7.6 billion the banks have accounted for to cover PPI claims.
And online message boards, including our own Q&A section, have continued to be filled with stories of people waiting for up to six months for compensation.
The ‘gentlemen’s agreement’ was that compensation would be paid out within 28 days of a claim being settled.
So I contacted two of the banks that have been most consistently complained about in terms of delays in payouts to get their side of the story.
First up was Lloyds TSB. We’ve heard from some lovemoney.com readers that they’re still waiting for a payout up to six months after compensation was agreed.
So I asked Lloyds TSB why it was taking so long. A spokesperson told me: “The vast majority of our customers are receiving PPI payments well within our target of 28 days. However, due to an isolated issue, some Lloyds TSB Loans customers have experienced a delay with their payments. We are sorry for any inconvenience this has caused our customers as this is not the level of service we aim to provide.
“This issue has now been substantively addressed. Furthermore, we have updated our procedures and put appropriate controls in place to avoid against similar delays occurring in the future. We encourage customers to contact us on the dedicated number. We apologise to customers who have experienced delays when contacting our PPI telephone helpline.”
Lloyds TSB has also agreed to investigate the delays in payouts to lovemoney.com readers that we've passed on to them.
The second was UK Asset Resolution, the company dealing with payouts for Northern Rock (NRAM) customers. Their spokesperson told me: "NRAM customers can be assured that we take all complaints seriously, have robust processes in place and strive to resolve issues with customers within a reasonable timeframe.
"On receipt of customer's providing full and complete acceptance details eg bank account information, NRAM endeavour to pay out within 28 working days."
You could wait a year for any money
If you need to involve the Financial Ombudsman Service (FOS) because your claim has initially been rejected by the company that sold you the insurance, you could be looking at a wait of a year or more before you receive any money - if the bank is slow in paying out.
I spoke to the FOS who said that, in the financial year 2010/11, it resolved 70% of cases within six months. However, PPI complaints now account for over half of its workload. The FOS is estimating that in 2011/12 it will deal with 145,000 cases, up dramatically from the 50,000 it handled in 2009/10.
Its advice is to make sure you have as much documentation as available as possible to avoid unnecessary delays.
No need to turn to a claims management company
So can a claims management company speed the process up? These companies take a percentage of any compensation you receive in return for their services. And I was interested to read a comment from a director of one such company, Consumer Action, on one of our previous articles on PPI compensation.
This person wrote: “Yes you can write a letter to your provider, sit back and wait to see what happens, but without doing the proper research and having experience within the industry a 'layperson' will not fully understand the complaint handling rules contained within the FSA [Financial Services Authority] handbook, the FOS expectations of firms regarding redress methodology and what pressure is on the industry as a whole to sort things out and how this will affect complaint handling timescales etc. etc.”
However, this is a flawed argument. You don’t need any knowledge of the FSA guidelines and the FOS does not prioritise cases over those it receives from individuals.
An FOS spokesperson told me: “The process is exactly the same, whether the complaint comes from a consumer or a claims management system, and it is treated in the same way.”
So the only real reason to use a claims management company is if you don’t want to be involved in the process yourself, whether it’s because you don’t have the time or don’t want to complain yourself. But, again, it will cost you up to 25% of any compensation you receive.
And if you are waiting on a compensation payout, you can involve the FOS again. The spokesperson said: “We’re happy to chase companies on consumers’ behalf. All people need to do is give us a call.” The number to call is 0800 023 4567 and they’re open 8am to 6pm Monday to Friday and 9am to 1pm on Saturdays.
Check to see if you're due compensation
It’s also worth noting that even if you haven’t complained about mis-sold PPI, you may be entitled to compensation. And you don’t have to wait to receive a letter from the bank or financial company that sold it to you.
Banks and other firms are also currently sending out letters to people who have complained in the past but have not received compensation. If you do receive a letter saying you may be entitled to a payout, you should act on it promptly.
You can find out more about how to begin the compensation process in our article How to claim your PPI compensation.
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