Top PPI mis-sellers face £55m costs

The ten worst offending payment protection insurance (PPI) mis-selling firms could face costs of over £55m to enable regulators to deal with the problem.

As part of its increasingly heavy workload from PPI the Financial Ombudsman Service (FOS) is attempting to crackdown on the biggest offenders in the industry as complaints continue to rise.

Complaints received by FOS relating to the mis-selling scandal in 2011 have outstripped predictions by doubling initial estimates and the organisation is expecting around 165,000 cases in 2012.

Under plans released by the regulator for its 2012/13 funding requirements a £350 fee for each PPI case it deals with would be levied on all firms with more than 25 cases.

At present FOS figures are only available for the first six months of 2011, but if the £350 fee had been applied over that period, the top ten offending firms would have been charged almost £28m.

If then applied to a whole year, this estimate reaches £55,718,600, taking into account the free 25 cases each institution is allowed.

According to the FOS data, these firms accounted for 79,723 new cases between January and June last year, with 41% tax payer-owned Lloyds TSB Bank (16,965 complaints) leading the way, followed by Barclays (12,862) and Bank of Scotland (which is also part of Lloyds Banking Group, 9,945).

MBNA Europe (8551), HSBC (8791), Capital One (6752), 83% state-owned Royal Bank of Scotland (5225), National Westminster Bank (also part of RBS, 4234), Black Horse (also part of Lloyds Banking Group, 3533) and HFC Bank (part of HSBC, 2865) complete the top ten.

In its plan and budget for 2012/13, the Ombudsman said: "The challenges of our PPI caseload are unprecedented.

"The number of cases we are assuming we will receive in 2012/2013 - 165,000 - will account for the majority of our incoming caseload.

"But the number of PPI cases we actually receive could be materially higher or lower - and there is considerable uncertainty about the volume of these cases in future years," it added.

To manage and fund this significantly increased workload, the ombudsman service explained it was proposing to "charge businesses a supplementary case fee of £350 for each PPI mis-selling case referred to the ombudsman service - but chargeable only when businesses have more than 25 of these cases a year, reflecting where the costs are actually incurred in sorting out PPI mis-selling on this scale".