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UK loan insurance mis-selling complaints soar - watchdog
October 21, 2013 / 11:06 PM / 4 years ago

UK loan insurance mis-selling complaints soar - watchdog

LONDON (Reuters) - The Financial Ombudsman Service said the number of complaints it received about mis-sold loan insurance soared in the six months to September, raising the prospect banks will have to pay out more in compensation.

Tower Bridge and the Canary Wharf financial district (at rear) are seen at dusk in an aerial photograph from The View gallery at the Shard, western Europe's tallest building, in London January 8, 2013. REUTERS/Andrew Winning

The Ombudsman, which steps in when banks and their customers cannot reach agreement, received more than 247,000 complaints about payment protection insurance between April and September, up 149 percent on the same period the year before.

Banks have so far set aside 16 billion pounds to deal with the most expensive consumer scandal in British history. Bank executives fear the total bill could rise to around 20 billion pounds.

The policies were meant to protect borrowers if they were sick or unemployed but were often sold to people who would have been ineligible to claim.

Meanwhile, new rules making it easier to switch banks have resulted in an 11 percent rise in customers moving accounts since their introduction last month.

The Payments Council said 89,000 switches were completed since September 16, up from 80,000 in the same period the previous year. The new rules require customers to be able to switch accounts within seven working days.

“We never expected that every customer who is tempted to switch would rush out to do so at launch, but this is an encouraging start,” said Adrian Kamellard, chief executive of the Payments Council.

The government said in June that if seven-day switching did not deliver the expected benefits it would consider more radical options, including “full account portability” - meaning an industry-wide IT platform that would allow customers to keep their account details when they switch banks.

Reporting by Matt Scuffham; Editing by David Cowell

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