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High Court backs FSA and FOS over PPI

The British Bankers’ Association has lost a judicial review against the FSA and the Financial Ombudsman Service over measures to offer consumers protection in relation to sales of payment protection insurance.

The banks have 21 days to consider whether to appeal the judgement.

The BBA has said the processing of PPI complaints will still be on hold until the banks have decided what action they wish to take in light of the ruling.

The BBA launched a judicial review against the FSA and the FOS at the High Court in London in October.

The move followed a policy statement published by the FSA in August outlining a package of measures to protect consumers buying PPI. The measures included guidance to ensure complaints are handled properly, an explanation of when firms should analyse past complaints, and an open letter setting out common sales failings.

Firms were supposed to implement the measures by December 1.

The FSA has taken action against 24 firms for failings in relation to PPI sales with fines totalling nearly £13m. The biggest fine was imposed on Alliance & Leicester, now part of Santander, which was fined £7m in October 2008 for serious failings in its telephone PPI sales.

The FOS says since the BBA launched its legal challenge in October 2010, the ombudsman has been receiving up to 5,000 PPI cases each week.

FOS chief ombudsman Natalie Ceeney (pictured) says: “This judgement is very clear-cut – and it confirms that the ombudsman’s approach to PPI complaints is right. People have been waiting a long time while the banks’ legal action has been ongoing. I would now like to see financial businesses showing real commitment to sorting out their customers’ complaints efficiently and promptly.”

In a statement the BBA says: “We are disappointed with today’s judgement and now need to consider the details of it very carefully as well as next steps, including whether it would be appropriate to apply for permission to appeal.

“Any complaints that are directly affected by the judicial review and therefore can not be decided will continue to be placed on hold until the next steps have been decided.”

The FSA says: “We believe this decision signals the end of years of poor complaint handling and will trigger a dramatic improvement in the way customers are treated when complaining.

“The FSA has not put a waiver in place so firms must continue to deal with complaints where possible, including letting customers know they can refer their complaint to the ombudsman if they are unable to progress it. Failure to do so may result in enforcement action.”


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There are 18 comments at the moment, we would love to hear your opinion too.

  1. Target driven sales will always bring about such a scenario. Banks should offer a fully qualified advisory facillity or get out of the personal advice arena altogether. Commercial interests dont work when personal financial planning advice is required.

  2. These systemic problems will occur again and again, until the banks actually suffer a loss. Any compensation they are now forced to pay will be dwarfed by the illicit profits that they have secured by mis-selling the product in the first place.

    It’s also a shame that the OFT and the FSA are only now trying to seek some redress when, in fact, had they been doing their jobs properly, customers would never have been sold this rubbish in the first place.

    Poorly targetted regulation, crap products and a banking industry which is totally target driven and corrupt – but the FSA will recount this episode as a success story !

  3. Oh no this is not good news either way for the rabid IFA’s who normally comment on such matters, yes the banks have lost but the FSA have won!!!! Damn caught between a rock and hard place.

  4. A thought in passing:

    There will be times when the Money Advice Service will see PPI as an issue to be considered by someone approaching them for “guidance”.


    – unless that “guidance” is very closely related to the individual’s circumstances

    – and then subsequently monitored to alter that “guidance” when the individual’s circumstances change

    – I suspect there will be problems ahead.

    And this is just one such situation where I suspect that can happen.

  5. Car accident waiting to happen !!!

    This is always the case when products/funds are sold on mass.

    PPI, structured Etc Etc.

    However I can-not condone the whole compensation culture that the FSA / FSCS promote, this just gives rise to more companies offering no win no fee services, you only have to switch on the telly or read a paper to head lines of have you been mis-sold this have you been mis-sold that, have you suuffered a loss because you were’ t told the risks.blah blah blah.

    No wonder a fee’s are so high they must be inundated with claims of mis-selling.

  6. But DH, it can’t possibly be the customer’s fault. He/she is a good person and ambulance chasing parasites are only protecting these good people from their own stupidity and lack of care/common sense…

  7. It is a pity that the FOS and FSCS does not do more to make the public aware that they do not need to incur the cost of a solicitor to take a complaint to their bodies. They (the solicitors) just add to the costs that we all have to bear.

  8. Much as I dislike the Banks and have no liking for PPI I dislike retrospection even more.

    The thought that what you are doing today, which is legal,can be made illegal tomorrow is worrying at best.

    Still what can you expect in a world where TCF wins out when in conflict with a contract.

  9. Not wishing to be sympathetic to the banks, I wonder how many of these people in the coming months may be glad they had PPI cover even if it was forced upon them.

  10. I’d thought the crux of this JR was that regulation by hindsight is illegal. Does this verdict confirm that the courts consider that regulation by hindsight to be, after all, legal? If so, it seems to be a very sad day for British justice.

  11. I have encountered clients who were mis sold PPI by their bank, and advised them to claim, (successfully) He was a retired police officer and his wife a retired teacher, both on pensions, why did they need PPI when both were over retirement age and could not lose their incomes, slipshop and target driven should be driven out of the industry.

  12. Isn’t this good news? Banks have been flogging insurance to people that are ineligible to claim? Often also saying that it was a compulsory part of the loan/credit agreement (deceit) charging a hefty premium, adding it to the debt and charging further interest and then addding it to the debt… Finally they have been told to cough up and stop it. Banks are meant to be banks…are you listening Tesco?

  13. I am afraid the banks have nobody to blame but themselves. This is nothing to do with retrospective regulation, this is to do with mass scale mis-advice.

    Customers of banks were made to think PPI was mandatory and were pressured to take PPI as a ‘condition’ of the loan being granted. There are also the thousands who were sold PPI when it was not suitable due to their employment status or health issues.

    The people selling this product were doing so purely for themselves with either no understanding or blatant disregard for customers.

  14. Judicial review is a procedure in English administrative law by which the courts in England and Wales supervise the exercise of public power. It does not evaluate the rights or wrong or merits of that public power. The FOS has got this power and they have been given the authority to use it and that is all the JR is looking at. It is WRONG to suggest there has been some great battle between nasty bankers and innocent consumers.

    Personally I had hoped The British Bankers’ Association would win the judicial review because retrospective legislation made up by a quasi judicial body is bad news for any democratic system – it is even worse than the dreaded PPI, for which I have no love either.

    The FOS has an army to feed and it has been looking for yet another so called misselling review -this is their new war! Consumers will have their distrust reinforced and increasingly will look to the Nanny State to provide. But the Nanny State won’t provide.

  15. Who is Frazer Maul?

    The people selling it were the CEOs at the banks, one or two have been on the FSA Board. Some have retired on a pension which is being paid for by the selling of dodgy products and iffy advice. Sounds like the entire financial services sector including the regulators!

    What has regulation done for us? Nothing of benefit whatsoever.

  16. Frazer Maul is exactly who it says on the posts.

    I would ask who is ‘exasperated me’?

    I am pleased you enjoy my posts unfortunately I can’t say the same about yours, just the same old some old anti-regulatory claptrap, it seems you like to the blame FSA for everything.

    I am not in anyway a huge fan of the FSA but I have a balanced view of things, not quite sure why you disagree with my post on the banks mis-selling PPI and would love to know when and where you saw a bank CEO actually selling PPI!!!!!!

    And by the way regulation will get all the people mis-sold PPI their money back and rightly so.

  17. Why are people bashing the FSA on post relating to this subject, the banks are clearly in the wrong, consumers need to be reimbursed.

  18. Premier Shareholders Group 21st April 2011 at 7:26 pm

    UK based IFAs wishing to learn more about misdeeds committed outside the safety of UK regulation should read Spanish lawyer Antonio Flores blog including :-

    OK so this is Europe not the UK (lol) but there is some interesting information here.

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