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.”