The PPI crisis has been raging for the past several years and the number of new claims filed every week has increased to over 10,000. However, the banks may have finally started to reform their claims handling processes. Caroline Wayman, head of the Financial Ombudsman Service, said that the number of complaints filed directly to the FOS has finally started to drop, and that banks need to be cautious about outsourcing claims handling to third party companies.
Outsourcing Poses Risks
Many banks have encountered problems after they outsourced their claims handling services. One of the most high profile cases involved Barclays and Deloitte.
Barclays hired Deloitte to process PPI claims. Many customers complained that many legitimate complaints were rejected. An undercover journalist from the Times investigated the case. He reported that he was instructed to reject complaints that were filed by a claims company or alleged unscrupulous conduct on the part of a salesperson.
Barclays received a lot of backlash over this scandal. Officials from the bank announced that the practices did not reflect their corporate policies and they didn’t condone them in any way. They immediately fired Deloitte as its claims handler and stated that they would reevaluate all PPI claims.
This case helped the banks realize the risks posed of hiring a third party to handle financial claims. Other banks have since started handling their own claims.
Unfair Practices Affect FOS and Customers
Customers hope to get compensated in a timely manner. They have become increasingly frustrated that many banks have outsourced their claims handling services to companies that reject claims that should have been upheld.
This practice has also become a huge burden for the Financial Ombudsman Service. Customers have to appeal their claims to the FOS after they are rejected by the banks. They also have to appeal if they think the value of the claim was calculated incorrectly. Some customers have used a PPI Claims Company and found that the bank paid them 40% less than they were entitled to.
Ceeney said that the banks will need to take more responsibility for the way they handle claims in the future. The Financial Conduct Authority has also told banks that they need to reform their practices. Banks may stop outsourcing their claims to Deloitte and other companies when they realize that they are opening themselves up to possible fines.