Lloyds Banking Group has stopped processing complaints related to mis-sold payment protection insurance despite warnings from the FSA not to do so.
The decision comes after the banking sector launched a judicial review against the FSA’s plans to introduce tougher regulation against PPI complaints.
The FSA is contesting the British Bankers’ Association’s review and called on banks continue handling PPI claims as the review was being undertaken.
However, Lloyds confirmed yesterday that it was to change its policy, a move which is expected to be followed by other lenders according to the Financial Times.
“Complaints which are affected by the review are only being processed up to a point,” said a spokesperson. “We are seeking clarity from the FSA and the Financial Ombudsman Service on the judicial review, and until this is received complaints may be delayed slightly.
Lloyds did not say how many complaints had been put on hold. Lloyds no longer sells PPI but has attracted the highest number of PPI complaints to the Financial Ombudsman Service.
The bank was the subject of nearly 8,500 new general insurance disputes lodged with the ombudsman in first half of 2010, the majority PPI related.
Since the FSA took on regulation of PPI in 2005, it has taken enforcement action against 24 firms, largely for mis-selling.
In the past five years more than 1m complaints have been made to firms over PPI. In 2009/2010 alone, customers referred 49,196 complaints to the ombudsman.