BBA launches judicial review against FSA and FOS

The British Bankers’ Association has launched a judicial review of the FSA’s new complaints handling measures for payment protection insurance.

The FSA published a policy statement in August outlining a package of measures to protect consumers who buy PPI.

These measures included new handbook guidance to ensure complaints are handled properly and proper redress is paid, details on when firms should review past complaints to identify serious flaws in sales practices, and an open letter to help firms identify bad practice.

Firms were told to implement the measures, which also included better staff training, by December 1, 2010. The regulator estimated the cost to firms of changing their processes would be up to £3.2bn.

The BBA has today filed papers with the High Court to request a judicial review of the FSA’s measures, as well as some decisions made by the Financial Ombudsman Service.

In a statement the BBA says: “It has unfortunately been necessary to do this because there is insufficient legal clarity about what the FSA and FOS is proposing in this area. Everyone’s actions must be assessed on the basis of a proper understanding of the relevant law and regulation and this procedure will bring this about.
“We will continue to explore all opportunities for dialogue with the FSA to resolve the industry’s concerns.  No one wants to go to court but the law needs to be clear. We hope to get this resolved as quickly as possible.”

In response the FSA says it will contest the judicial review brought by the BBA.

The regulator says firms will be expected to continue handling PPI complaints while the review process is ongoing.

The FSA says: “Since the FSA took on regulation of PPI in 2005 it has taken enforcement action against 24 firms for sales failings. The FSA has carried out three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans and visited over 200 firms in order to improve the market.

“The FSA strongly believes that the package of new complaint handling measures is a sensible and fair solution for consumers and the industry alike.

“That is why the FSA will vigorously contest the BBA’s judicial review of the new complaint handling procedures for the PPI market.”