FSA wins PPI battle in high court

Britain’s banks fail in challenge to overturn regulations regarding the mis-selling of payment protection insurance (PPI) policies Britain’s banks will be forced to re-open thousands of claims over the mis-selling of payment protection insurance (PPI) and pay up to £3bn in compensation following a high court ruling. PPI is insurance typically sold to consumers at the point of sale of personal loans, credit cards and other forms of debt, which is designed to meet their repayments in the event of accident, sickness or unemployment. Many customers have discovered after paying for PPI policies that they would never qualify for a payout due to exclusions in the terms and conditions, while others didn’t even realise they had signed up to buy the insurance. In December the Financial Services Authority introduced rules to stop mis-selling, which required providers to talk customers through the key features of a policy rather than assuming they will read any relevant documentation, and make it clear that the cover is optional. But the banks, represented by trade body the British Bankers’ Association, compained that the rules were unfair because they would be applied retrospectively. In January the BBA launched a high court challenge against the FSA and the Financial Ombudsman – but today’s ruling found against them. The high court judgment endorsed the approach taken by the ombudsman and the FSA, and the banks now have 21 days to appeal. Several banks had put PPI complaints on hold until the outcome of the judicial review was known. However, the FSA made it clear they should still be dealing with complaints, and anyone whose bank has not dealt with their complaint within eight weeks is entitled to take it to the Financial Ombudsman Service . The ombudsman service said the lack of cooperation from some financial businesses has made it difficult to progress PPI cases over this period. “However, the clear-cut judgment means that banks and other financial businesses should now be in the position to deal promptly, efficiently and fairly with their customers’ PPI complaints,” a statement said. The ombudsman continues to handle large volumes of PPI complaints from consumers. Since the BBA launched its legal challenge in October 2010 it has been receiving up to 5,000 PPI complaints a week , while complaints surged by 63% between the first and second half of 2010 from 266,685 to 434,596. Martin Lewis of MoneySavingExpert.com said: “The banks have behaved abominably. They’ve deliberately mis-led reclaimers by telling them everything is on hold and used the memory of the bank charges hold to make it seem legitimate. “The hold has not been agreed by the FSA or the ombudsman, who have both lambasted it, and has potentially left hundreds of thousands of people – each trying to reclaim thousands of pounds – wrongly in limbo and the ombudsman over-stretched. “If this goes to appeal, as expected, they cannot be allowed to continue. I believe they should be fined for the way they have tried to manipulate the system to consumers’ detriment. “It is time we had a system of collective consumer redress. The fact the banks can deliberately reject claims to put people off taking it further, even though the vast majority who go to the ombudsman win, is against natural justice and needs to stop.” Payment protection insurance Banks and building societies Insurance Consumer affairs Banking Mark King guardian.co.uk

Posted by on April 20, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.