A record number of disputes regarding the mis-selling of payment protection insurance (PPI) will need to be resolved over the next year, as banks and insurers have subjected customers to "delays and inconvenience", a finance watchdog warned today.
Despite a legal challenge to PPI complaints being dropped last year, the Financial Ombudsman Service says it's "disappointing" a significant number of consumers are still waiting for businesses to clear up their cases.
More than three million people are in line for compensation, expected to result in an overall bill of between £7 billion and £9 billion as a result of the systemic mis-selling of the product for years.
The Financial Services Authority recently said that more than £1 billion was paid out in the first 10 months of 2011 to customers complaining about PPI, designed to cover loan and credit card payments if you cannot work.
Lloyds TSB, in particular, has been guilty of failing to pay mis-selling victims within 28 days of agreeing the redress sum.
Other banks have simply been slow in deciding whether or not consumers are due money back.
As a result of banks stalling, the Ombudsman is now sat on a massive backlog of cases it needs to adjudicate on.
Huge rise in cases
The Ombudsman expects to settle 130,000 PPI cases in the financial year 2012/13 and warned many of these disputes are likely to be "more entrenched".
This figure is up from 109,500 this financial year and more than double the 60,000 PPI cases resolved in 2010/11.
The Ombudsman will need to gear up on an "unprecedented" scale to tackle complaints, with PPI cases expected to make up half of its workload.
Tony Boorman, principal ombudsman, says: "A year after the High Court ruling gave us legal finality on the approach that financial businesses should take on PPI complaints, it's disappointing there's little finality for significant numbers of consumers who are still waiting for their bank or insurer to deal with their complaint.
"The delays and inconvenience that this causes consumers means the Ombudsman now has to gear up for unprecedented demand and volatility in our workload."
The watchdog has seen a 9% rise in banking and credit complaints, with a key factor in the rise being the financial pressures felt by consumers, particularly in relation to mortgages.
General insurance cases are also up by a third in this financial year, compared with last year, including a rise in complaints about home and domestic energy insurance and more disputes about the way motor insurers handle claims.
Meanwhile, current account complaints have fallen by 20% and complaints about investments, including pensions, have declined by around 3% during this financial year.