UK banks have lost their challenge in the High Court against the Financial Services Authority (FSA) over the mis-selling of Payment Protection Insurance (PPI) to around 3 million consumers and are no longer to contest the ruling.
Mr Justice Ouseley rejected the challenge which is expected to cost the banking industry nearer 4.5 billion pounds as they will now have to compensate those consumers that were mis-sold policies designed to cover loan, credit card or mortgage payments should they become unable to meet them through illness or redundancy.
The British Bankers' Association has decided not to appeal against the High Court ruling.
The argument
The court case came about after the banks challenged the FSA over new guidelines inferring that the banks must back date claims and pay compensation for mis-selling of PPI, even if their customers had not complained. Customers mis-sold would have to be repaid their PPI premiums, plus interest and this would also apply if someone had paid for a policy in full up front.
The banks argued that the FSA was effectively applying new rules to previous sales of PPI - even when those sales were regulated by other FSA rules.
It is likely that the banks will appeal to the Court of Appeal and possibly the Supreme Court if necessary. This was the route they took when they challenged the OFT over unlawful bank charges.
So why do the banks sell this policy?
Because most banks and credit card providers earn only small margins in a highly competitive lending market they help make up for this by selling the PPI which not only earns them money but also pays hefty commissions to the agents and staff and this is what has fuelled the mis-selling.
What to do now
If you feel you have been mis-sold a policy then you have the right to lodge a complaint with the bank or credit card provider who must respond within eight weeks. If your complaint is not resolved then you can go to the Financial Ombudsman (FOS) who will adjudicate and make the final decision. The FOS is free to the consumer.
The FOS has handled over 200,000 complaints from consumers, including 100,000 in the past financial year and is currently seeing 5,000 a week. Remember these were cases previously rejected by the banks with the FOS having ruled in favour of the consumer in 89% of all its cases during 2009 - 2010.
The British Banking Association (BBA) is likely to leave some cases on hold until it decides whether to appeal or not.
Why is the date I took out the policy so important?
PPI only came under the FSA jurisdiction in January 2005, therefore any policies sold prior to this date are not covered by FSA rules and regulations and they cannot be referred to the Financial Ombudsman Service for investigation if they have not been settled after eight weeks.
If you have a policy prior to this date and feel you have been mis-sold then you may have to go through the Courts to seek a refund of your premiums.
Do you feel you have been mis-sold PPI and don't know where to start?
If so then we have our very own easy to read questions and answers and helpful letter templates.
- Letter 1 template to request your terms and agreement
- Letter 2 template to demand a refund.
All free at the DebtWizard guide to Payment Protection Insurance (PPI).
Listen to Mike explain on BBC radio what consumers affected need to do following the High Court ruling - Listen (5mins 30 secs)
