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| Claims for mis-sold payment insurance are costing banks time as well as cash | |
| (35 minutes later) | |
| The agent in the Barclays call centre had scrutinised the claims form submitted by a customer who took out a loan in 2002 and started to conclude that the bank was going to have to pay compensation for missold payment protection insurance (PPI). | The agent in the Barclays call centre had scrutinised the claims form submitted by a customer who took out a loan in 2002 and started to conclude that the bank was going to have to pay compensation for missold payment protection insurance (PPI). |
| The customer had a job with an employer that provided sick pay, likely to make PPI an unnecessary expense. A quick cross check with her current account showed the regular payments from her employer, confirming the agent's decision to uphold her claim. | The customer had a job with an employer that provided sick pay, likely to make PPI an unnecessary expense. A quick cross check with her current account showed the regular payments from her employer, confirming the agent's decision to uphold her claim. |
| But even such a seemingly straightforward decision can take an agent in the Poole processing centre up to an hour. More complicated claims, so-called "rollies" where customers have lots of different loans, can take hours to work through, even before any calculation of the amount to be paid out – that work is carried out in India. | But even such a seemingly straightforward decision can take an agent in the Poole processing centre up to an hour. More complicated claims, so-called "rollies" where customers have lots of different loans, can take hours to work through, even before any calculation of the amount to be paid out – that work is carried out in India. |
| Barclays now has 3,400 staff in eight centres in Britain and two in India tackling claims for PPI, officially the most complained about product in history. It is also the costliest mis-selling scandal ever; the big banks face bills topping £12bn – a sum that seems destined to rise as an estimated 34m policies have been sold since 2001. | Barclays now has 3,400 staff in eight centres in Britain and two in India tackling claims for PPI, officially the most complained about product in history. It is also the costliest mis-selling scandal ever; the big banks face bills topping £12bn – a sum that seems destined to rise as an estimated 34m policies have been sold since 2001. |
| The 2nd floor in Barclays' imposing building in Poole, with its stunning harbour views, was vacant six months ago. Now it houses 450 staff working on PPI claims. By January there will be 600, and there could be more still as the scandal rumbles on. The bank operates two shifts from 7am to 11pm, with office space punctuated by white boards spelling out targets for claims to be handled. By 11am, one team had solved 92 claims. Staff bonuses are based on "quality and productivity". Barclays is by no means alone in gearing up to handle the deluge of PPI claims. Bailed out Lloyds Banking Group, which has admitted its staggering £5.3bn PPI bill is likely to rise even further, has 6,000 staff working on claims. HSBC has 600 and RBS, the other bailed out bank, has 1,800. | The 2nd floor in Barclays' imposing building in Poole, with its stunning harbour views, was vacant six months ago. Now it houses 450 staff working on PPI claims. By January there will be 600, and there could be more still as the scandal rumbles on. The bank operates two shifts from 7am to 11pm, with office space punctuated by white boards spelling out targets for claims to be handled. By 11am, one team had solved 92 claims. Staff bonuses are based on "quality and productivity". Barclays is by no means alone in gearing up to handle the deluge of PPI claims. Bailed out Lloyds Banking Group, which has admitted its staggering £5.3bn PPI bill is likely to rise even further, has 6,000 staff working on claims. HSBC has 600 and RBS, the other bailed out bank, has 1,800. |
| The story of a PPI mis-selling cannot be told without reference to the claims management companies that submit about 40% of applications for compensation on behalf of customers. No one appears to be immune from the texts and cold calls suggesting they might be eligible for compensation: Antony Jenkins, the boss of Barclays gets them; Martin Wheatley, the boss of the new Financial Conduct Authority regulator, tells the Money section today how his 16-year-old daughter received a text to say she was owed £3,000, even though she could never have had a loan. | The story of a PPI mis-selling cannot be told without reference to the claims management companies that submit about 40% of applications for compensation on behalf of customers. No one appears to be immune from the texts and cold calls suggesting they might be eligible for compensation: Antony Jenkins, the boss of Barclays gets them; Martin Wheatley, the boss of the new Financial Conduct Authority regulator, tells the Money section today how his 16-year-old daughter received a text to say she was owed £3,000, even though she could never have had a loan. |
| The statistics fired out by Barclays show that 55% of the 5,000 calls a day that it handles on PPI come from claims management companies, one such firm made the claim on behalf of the Barclays' customer whose employer paid sickness benefits. She probably handed 25% of the compensation paid her by Barclays over to the firm – money she could have kept had she made the claim herself. | The statistics fired out by Barclays show that 55% of the 5,000 calls a day that it handles on PPI come from claims management companies, one such firm made the claim on behalf of the Barclays' customer whose employer paid sickness benefits. She probably handed 25% of the compensation paid her by Barclays over to the firm – money she could have kept had she made the claim herself. |
| Paul Maddox, customer services director of Barclays, would rather customers applied directly to the bank. "The analysis shows there is no difference in the uphold rate if the claim is submitted by the customer or by a [claims management company]," said Maddox. | Paul Maddox, customer services director of Barclays, would rather customers applied directly to the bank. "The analysis shows there is no difference in the uphold rate if the claim is submitted by the customer or by a [claims management company]," said Maddox. |
| Citizens Advice, which urges customers to go to their banks directly, argues that claims firms are taking a £2bn cut of PPI compensation. "Data from Citizens Advice bureaux across the country found people were spending, on average, over £1,100 in fees for something they can do themselves for free. One CAB even saw a client who paid over £4,000 in charges," the advice specialists said. The firms also put claims into the Financial Ombudsman Service, which deals with complaints by customers whose claims cannot be handed in the regulatory limit of eight weeks or who are unhappy with the decision made. | Citizens Advice, which urges customers to go to their banks directly, argues that claims firms are taking a £2bn cut of PPI compensation. "Data from Citizens Advice bureaux across the country found people were spending, on average, over £1,100 in fees for something they can do themselves for free. One CAB even saw a client who paid over £4,000 in charges," the advice specialists said. The firms also put claims into the Financial Ombudsman Service, which deals with complaints by customers whose claims cannot be handed in the regulatory limit of eight weeks or who are unhappy with the decision made. |
| The ombudsman service, led by Natalie Ceeney, has little sympathy for the banks. She told MPs last month: "Banks not investigating cases properly played into PPI firms' hands. In a quarter of cases where banks said customers didn't have PPI, they did – the banks were not doing their job properly." | The ombudsman service, led by Natalie Ceeney, has little sympathy for the banks. She told MPs last month: "Banks not investigating cases properly played into PPI firms' hands. In a quarter of cases where banks said customers didn't have PPI, they did – the banks were not doing their job properly." |
| At its offices in Canary Wharf, the ombudsman itself is deluged. It is now taking more than 12 months to deal with PPI complaints even though staff numbers have been boosted from 1,000 to 2,500 in the two years – and are to rise to 3,000 shortly. About half the cases it receives come from claims firms – although this is down from seven in 10 last year. The firms use the standard form created by the Ombudsman to make customer claims, and the service is free. | At its offices in Canary Wharf, the ombudsman itself is deluged. It is now taking more than 12 months to deal with PPI complaints even though staff numbers have been boosted from 1,000 to 2,500 in the two years – and are to rise to 3,000 shortly. About half the cases it receives come from claims firms – although this is down from seven in 10 last year. The firms use the standard form created by the Ombudsman to make customer claims, and the service is free. |
| Lloyds has argued that the ombudsman should charge firms the £850 per claimant fee that it levies on the sellers of PPI to bring down the volume of claims from the claims companies and cut the bill for banks, which also argue that half the claims they receive are "vexatious" – although that statistic is also disputed by the ombudsman. Amid evidence that the PPI scandal is only going to get more expensive and more time-consuming for banks, John Cridland, the boss of the CBI, argued this week that it was time to "draw a line" under the timescale for claims. That seems unlikely until banks have written to those customers it believes are likely to been mis-sold PPI – a process which has barely begun while the banks try to stay on top of the claims being filed. | Lloyds has argued that the ombudsman should charge firms the £850 per claimant fee that it levies on the sellers of PPI to bring down the volume of claims from the claims companies and cut the bill for banks, which also argue that half the claims they receive are "vexatious" – although that statistic is also disputed by the ombudsman. Amid evidence that the PPI scandal is only going to get more expensive and more time-consuming for banks, John Cridland, the boss of the CBI, argued this week that it was time to "draw a line" under the timescale for claims. That seems unlikely until banks have written to those customers it believes are likely to been mis-sold PPI – a process which has barely begun while the banks try to stay on top of the claims being filed. |
| Barclays centre in Poole had also processed another claim received via a claims management firm. This customer had argued that they had retired when they took out the loan in 2000, making it unlikely they would need PPI. The Barclays agent had made a check call to the customer, who said they were working at the time. It was enough for the agent to rule out a payment – at least this time. | Barclays centre in Poole had also processed another claim received via a claims management firm. This customer had argued that they had retired when they took out the loan in 2000, making it unlikely they would need PPI. The Barclays agent had made a check call to the customer, who said they were working at the time. It was enough for the agent to rule out a payment – at least this time. |
| Case studies Paying for PPI claims | Case studies Paying for PPI claims |
| Consumer bodies, the financial ombudsman and the banks themselves have warned that using a claims management company to make a PPI claim is unnecessary and costly. The firms typically charge 25% of any amount awarded, and some charge fees upfront. But some people say they would rather forfeit the money to let someone else deal with the claim. | Consumer bodies, the financial ombudsman and the banks themselves have warned that using a claims management company to make a PPI claim is unnecessary and costly. The firms typically charge 25% of any amount awarded, and some charge fees upfront. But some people say they would rather forfeit the money to let someone else deal with the claim. |
| Rosalind Shults, from Hertfordshire, has just successfully claimed £3,100 of missold PPI from Lloyds TSB. She paid a claims management company £750 to tackle the case for her. | Rosalind Shults, from Hertfordshire, has just successfully claimed £3,100 of missold PPI from Lloyds TSB. She paid a claims management company £750 to tackle the case for her. |
| "It was the best £750 I've ever spent," she said. "I work long hours and am sometimes on call in the evening and weekends so I was too busy at work and couldn't be bothered to deal with the claim myself." | "It was the best £750 I've ever spent," she said. "I work long hours and am sometimes on call in the evening and weekends so I was too busy at work and couldn't be bothered to deal with the claim myself." |
| Her claim stemmed from a number of loans she had taken out in succession with Lloyds TSB stretching back over the last few years. | Her claim stemmed from a number of loans she had taken out in succession with Lloyds TSB stretching back over the last few years. |
| "I knew I was paying PPI on the loans but the way the bank sold it to me was that I had to have the PPI to take out the loans," she said. "I didn't think that was right and eventually cancelled the insurance – and that's when I thought about claiming for the payments I'd made." | "I knew I was paying PPI on the loans but the way the bank sold it to me was that I had to have the PPI to take out the loans," she said. "I didn't think that was right and eventually cancelled the insurance – and that's when I thought about claiming for the payments I'd made." |
| The claim took almost six months but Shults says she only had to fill in limited paperwork and the claims management company did the rest. | The claim took almost six months but Shults says she only had to fill in limited paperwork and the claims management company did the rest. |
| "They also looked at a credit card account for me that I had had with Capital One that I didn't even know I had PPI on," she said. "I got back £80 from that." | "They also looked at a credit card account for me that I had had with Capital One that I didn't even know I had PPI on," she said. "I got back £80 from that." |
| Many people have never heard of the financial ombudsman service until they start a PPI complaint, yet the service can be invaluable. The ombudsman is now receiving up to 400 PPI complaints an hour, and upholding seven in 10 cases in the consumer's favour, with compensation averaging £2,750. | Many people have never heard of the financial ombudsman service until they start a PPI complaint, yet the service can be invaluable. The ombudsman is now receiving up to 400 PPI complaints an hour, and upholding seven in 10 cases in the consumer's favour, with compensation averaging £2,750. |
| In a quarter of cases where banks tell a consumer no PPI policy ever existed, the ombudsman later finds the bank was wrong. | In a quarter of cases where banks tell a consumer no PPI policy ever existed, the ombudsman later finds the bank was wrong. |
| "We often find rudimentary searches have not taken place. For example, postcode searches, previous addresses, maiden names and checking both people on a joint policy," said a spokesman for the ombudsman. | "We often find rudimentary searches have not taken place. For example, postcode searches, previous addresses, maiden names and checking both people on a joint policy," said a spokesman for the ombudsman. |
| "Alternatively, we've noticed a reliance on some banks to dismiss complaints on the basis of what's showing on the computer, rather than actively searching for the documents that might establish what actually happened with each complaint." | "Alternatively, we've noticed a reliance on some banks to dismiss complaints on the basis of what's showing on the computer, rather than actively searching for the documents that might establish what actually happened with each complaint." |
| One such case was that of Gina Giles (not her real name). Giles contacted the ombudsman after her bank rejected her complaint, telling her that it had never sold her a PPI policy. | One such case was that of Gina Giles (not her real name). Giles contacted the ombudsman after her bank rejected her complaint, telling her that it had never sold her a PPI policy. |
| This came as news to Giles, who had provided the bank with loan statements from 2009 proving that PPI was being applied. | This came as news to Giles, who had provided the bank with loan statements from 2009 proving that PPI was being applied. |
| Despite this, when the ombudsman investigated, the business still insisted there was no PPI policy and provided internal documents it felt proved Giles had not been billed for the insurance. | Despite this, when the ombudsman investigated, the business still insisted there was no PPI policy and provided internal documents it felt proved Giles had not been billed for the insurance. |
| The ombudsman asked the bank to take a closer look at Giles's evidence – after which the bank settled the claim and paid her back more than £2,000. | The ombudsman asked the bank to take a closer look at Giles's evidence – after which the bank settled the claim and paid her back more than £2,000. |
| "Had the bank considered this evidence when it was first submitted to them, Mrs Giles would have been spared a considerable wait to get her complaint resolved," said the ombudsman. | "Had the bank considered this evidence when it was first submitted to them, Mrs Giles would have been spared a considerable wait to get her complaint resolved," said the ombudsman. |
| Lisa Batchelor | Lisa Batchelor |