LONDON (Reuters) - Britain’s financial ombudsman service is receiving up to 10,000 new complaints about mis-sold loan insurance each week, pointing to a further rise in the compensation bill for banks.
Banks have already set aside 12 billion pounds to compensate customers wrongly sold policies meant to protect borrowers who lost jobs or became ill, and industry sources have told Reuters they expect the number to double.
The ombudsman service, which steps in when banks and their customers cannot reach an agreement, said it received more complaints between October and December alone than it had in any 12 month period between 2000 and 2010.
The latest data show an acceleration from the 5,000 complaints the service was receiving each week about mis-sold payment protection insurance between April and September last year. The ombudsman said earlier in January it was taking on 1,000 new staff to cope with the increase.
If the current rate of complaints continues, the ombudsman said it will have received over 350,000 PPI complaints in the year ending March 2013, over double its original forecast of 165,000. It is currently upholding 62 percent of complaints in the customers favour, compared with 7 out of 10 previously.
PPI is the most complained about financial product ever in Britain, with the ombudsman receiving its 500,000 case last October. The second highest is mortgage endowments, about which 350,000 complaints have reached the ombudsman.
Britain’s banks recently asked the FSA to consider setting a deadline for customers to claim compensation for mis-sold loan insurance amid fears about the uncertainty that the rising bill is creating for investors.
The British Bankers Association, a lobby group, approached the FSA about setting a deadline of April 2014 for customers to make claims. The FSA is currently considering the idea.
Reporting by Matt Scuffham; Editing by Mark Potter