PPI rules open door to retrospective regulation, says BBA
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The British Bankers’ Association has warned the FSA’s complaints handling measures for payment protection insurance effectively opens the door for retrospective regulation.
The BBA filed papers to the High Court on Friday launching a judicial review against the FSA and the Financial Ombudsman Service in an attempt to bring clarity to the FSA’s PPI complaints handling measures.
The FSA published a policy statement in August outlining a package of measures to protect consumers buying PPI which included guidance on paying redress and when firms should review past complaints.
In a customer factsheet explaining why the BBA has brought the review, the trade body says the FSA has advised the industry to consider complaints based on both the conduct of business rules that applied at the time and the regulator’s guiding principles for doing business.
In the document the BBA says: “We believe the FSA is effectively creating a precedent which permits it to apply new rules to previous sales - even where those sales were regulated by other FSA rules.”
The BBA argues that this could have implications for other regulated products.
The BBA says: “Therefore this ruling might not only affect customers who have bought PPI, but might also set a precedent that could affect all products regulated by the FSA.”
The FSA plans to contest the judicial review.
It is expected that firms will continue to handle PPI complaints while the review process continues.
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Readers' comments (9)
Exasperated me | 11 Oct 2010 1:04 pm
If the banks had been regulated properly in the first place they wouldn't be crying wolf now, would they?
"Retrospective" regulation, where have they been for the last two decades? making pots of bonus money? They make me sick.
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Julian Stevens | 11 Oct 2010 1:15 pm
Such action on the part of the BBA (assuming it wins which, with the best lawyers money can buy, it may well do) might actually lead to the FSA being forced to curtail its longstanding practice of regulation by hindsight.
Who'd have ever thought that the banks might actually do something useful to all us long suffering IFA's?
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PD Off | 11 Oct 2010 1:17 pm
I am getting the distinct impression that the Bankers "don't like it up them"
Welcome to our world.
We have had to put up with retrospective
regulation based on hindsight from the FSA for years.
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Daniella Lipszyc | 11 Oct 2010 1:30 pm
“The banks have every reason to be running scared from what they call ‘illegal and retrospective’ rules on the sale of payment protection insurance (PPI). The new rules will uncover the fact that for years, lenders have been fleecing consumers – not necessarily on the way it’s been sold, but on the scandalous commissions they’ve been raking in.
“In many cases that come to court, lenders are making – on average – 60 per cent commission on the sale of a single premium PPI loan. Not only are they creaming off thousands of pounds in pre-agreed commission with the insurer, they’re also making a tidy sum in interest over the duration of the long-term loan. Is it any wonder that PPI is so extortionate when such a large chunk of it is going into the back pockets of the lenders?
“What’s even more disturbing is that the vast majority of judges fail to see that non-disclosure of hefty commissions actually constitutes an ‘unfair relationship’ – this is absolutely ridiculous.
“Every single client that we speak to insists that they’d think twice about purchasing PPI if they knew the true cost of the policy. Lenders continually hide behind the fact that they’re ticking all the right boxes when it comes to the issue of mis-sold PPI – in reality, they’re blatantly taking advantage of people who, in many cases, are coming to them in desperate need of additional borrowing.”
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Anonymous | 11 Oct 2010 1:57 pm
As an ex-Park Row adviser, we have had structured products sales dating as far back as 2006 "reviewed" against an FSA checking template prepared in October 2009.
A significant number of these cases were "pre-approved" by Park Row, yet they are still deemed unsuitable in the MI data being sent to the FSA by the independent auditors (KPMG) to determine our "fitness & propriety" to advise.
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Stuart Rathbone | 11 Oct 2010 2:40 pm
I agree with Julian – we may in a roundabout way profit from the banks actions gaining case law precedents with which to challenge obvious retrospection in regulating other sectors of the FS industry (including IFA’s)
What gives me a nice warm glow is the vision in my head of the patriarchs in the oak panelled rooms at the top of the major banks choking on their brandies at the spectacle of their placemen at the FSA going native and turning it what looks like real regulators, but sadly I eventually wake up.
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Norm d'Plume | 11 Oct 2010 3:02 pm
And why didn't the banks do this when they (along with the rest of us) had the retrospective "legislation" of pensions miss-selling, endowment miss-selling and home income plans miss-selling?
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Evan Owen | 12 Oct 2010 9:25 am
The PPI gravy train has hit the buffers, it only took two decades, where would we be without regulation? We might be a lot better of without any regulation, much better than bad regulation and Adair Turner's 'Bad policy'.
Come on bankers, give the 'consumers' their money back and pay back the bonuses you have earned off the back of these 'conditional sales'.
I'll stand up in court when asked.
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Rizwan zeb | 12 Oct 2010 9:34 pm
I set up my business, with the intention of helping the consumer. We help people reclaim their mis sold policies. I have come across some really bad cases. Does anyone know what's going to happen.
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