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Path cleared for PPI compensation…for now

Path cleared for PPI compensation…for now

Category: Insurance

Updated: 20/04/2011
First Published: 20/04/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

People who have been mis-sold payment protection insurance (PPI) appear to have the law on their side after the High Court ruled against the banks over how complaints about the controversial policies should be handled.

The latest development in the battle between banks and the Financial Services Authority (FSA) has seen the regulator come out on top.

The ruling by the High Court means banks will have to review all past sales of PPI and invite customers who felt the policy was mis-sold to them to complain.

However, the long running saga may still have more distance left to run, as the British Bankers' Association (BBA) is deciding whether to appeal the judgement.

The banks claim the FSA unfairly wants to apply new rules to sales made in the past.

The amount of compensation the banks would have to find in order to recompense all the affected policyholders is estimated to be £3-£4.5 billion.

The differences between how the warring parties believe complaints should be dealt with is stark.

The FSA says around 60% of complaints made to firms by consumers over how they were sold PPI are rejected by the provider.

Yet of the 200,000 PPI cases the Financial Ombudsman Service has received to date, it has found in favour of the consumer in almost three quarters of them.

"The banks need to admit defeat, stop outsourcing their complaints handling to the Ombudsman and finally do the right thing by their customers," said Which? chief executive, Peter Vicary-Smith.

"The sheer volume of PPI complaints the Ombudsman upholds in favour of the consumer proves that consumers should always go to the Ombudsman if their claim is rejected by the bank."

Following the ruling, the BBA said any complaints that are directly affected by the judicial review will be placed on hold until it has decided what steps to take next.

As it has 21 days in which to make a decision about whether to appeal, consumers trying to make a claim face even more delays.

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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