Banks ‘paying the price’ for PPI scandal

Ten year anniversary of Citizens Advice super complaint on PPI

Thousands of people ripped off by the PPI scandal continue to seek help from Citizens Advice – 10 years after the charity launched a super-complaint against it.

Since the problem erupted, banks have been forced to shell out more than £20billion in compensation for mis-selling PPI. The figure is expected to grow as complaints continue to be raised.

New data from Citizens Advice latest advice trends report reveals it has helped people with more than 90,000 PPI issues in the last decade.

Sunday 13th September 2015 marks 10 years since the consumer champion launched a super-complaint about PPI after receiving large number of queries.  It triggered a study that led to action to stop PPI abuse.

The highest number of PPI issues Citizens Advice dealt with in a year was 15,000 in 2013, following banks agreement in 2011 to pay compensation.

As well as mis-selling PPI, the Financial Conduct Authority (FCA) has fined some banks for mis-handling people’s complaints. Earlier this year Lloyds was fined a record £117million for mis-handling.

Gillian Guy, Chief Executive of Citizens Advice, said:

“The PPI scandal reached pandemic proportions.  It is a real lesson for banks and the wider industry that they cannot get away with mistreating their customers.

“After dragging its feet when we first raised concern about PPI the industry is paying the price for not taking action sooner.

“Our super complaint was a game changer in forcing the industry to compensate for their mis-selling. This has helped people get millions of pounds back in their pocket.

“While regulation and banks’ approach to customer service has improved in recent years the seismic failings around PPI should serve as a constant reminder that firms cannot get away with ripping off customers.”

The scandal saw millions of customers mis-sold insurance policies they were told would protect them against losing their jobs or falling ill.

The policies were supposed to pay off any outstanding loans or mortgages, but many people did not need the policies in the first place, and others were unaware they were even paying for them. Some people were also sold PPI even though their circumstances meant they would not be eligible to claim.

Despite it being free for customers to claim compensation for PPI mis-selling, Citizens Advice says claims management companies have “flourished”. The charity says that by offering help for up to 30 per cent of a client’s payout, these companies have pocketed up to £5 billion of consumers’ compensation.

According to Citizens Advice, 39 per cent of people using these firms did not know they could make a claim without a management company.

The impact of PPI has been so significant that in 2012 the OBR stated its economic growth forecast of 0.8 per cent over two years would be mainly due to the impact of PPI fee repayments as people spend their payouts.

In recent months major banks have said that they are now putting increased sums of money away to cover upcoming PPI compensation payouts.

Citizens Advice and PPI

1995: Citizens Advice publishes Security at risk highlighting our evidence about problems with PPI including mis-selling and poor standards of service.

2003: Research with our debt clients show less than a quarter of those with PPI could make a claim, and many claims were rejected by insurers.

2005: As the number of people coming to us after being mis-sold PPI grows we submit a super complaint to the Office of Fair Trading. In response the OFT announced a PPI market study.

2006: OFT market study finds that there is a lack of competition in the PPI market and refers the matter to the Competition Commission to investigate.

2006: First fines for PPI mis-selling imposed on providers.

2007: We give evidence to the Competition Commission's inquiry into PPI.

2008: The Financial Services Authority’s new rules on selling PPI come into force and the Competition Commission publish their report on PPI, agreeing that there was a problem to answer.  

2009: The Competition Commission bans selling PPI at the point of sale when people take out credit.

2010: The British Banking Association takes the FSA to judicial review on PPI policy.

2011: The High Court dismisses the BBA’s application for judicial review. The banks agree not to appeal and the first compensation payments are paid.

2012: The OBR’s Economic and Fiscal Outlook report states that its economic growth forecast of 0.8% over 2 years would be mainly due to the impact of PPI fee repayments.

2012-13: The number of PPI issues we help people with peaks at over 15,000 in twelve months.

Notes to editors

  1. The Citizens Advice service comprises a network of local Citizens Advice, all of which are independent charities, the Citizens Advice consumer service and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more see the  Citizens Advice website .

  2. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality.

  3. To find your local Citizens Advice in England and Wales or to get advice online, visit  citizensadvice.org.uk .

  4. You can get consumer advice from the Citizens Advice consumer service on 03454 04 05 06 or 03454 04 05 05 for Welsh language speakers.

  5. Citizens Advice Bureaux in England and Wales advised 2.5 million clients on 6.2 million problems in 2014/15. For full 2013/2014 service statistics see our quarterly publication  Advice trends.

  6. Citizens Advice service staff are supported by more than 21,000 trained volunteers, working at over 2,500 service outlets across England and Wales.