Banks Fail in PPI Battle

The financial services industry may be forced to pay up to £4.5billion in compensation following a court ruling denying their appeal against new regulations dealing with the sale of Payment Protection Insurance.

Banks have been accused to mis-selling PPI, which insures customers against the chance they may not be able to make repayments due to unemployment or ill health, when taking out  a personal loan for instance. Following the accusations the Financial Services Authority launched regulations to assure PPI was sold fairly.

However the British Banker’s Association rejected this decision, bringing a case against the FSA and Financial Ombudsman Service which had approved the measures. The BBA’s main objection to the new regulations was that they are to be applied retrospectively.  In practice this would mean forcing banks to investigate cases of PPI mis-sold prior to the introduction of the new rules.

The FSA welcomed the ruling in a statement on their website. They said: “Our primary aim has always been to get proper redress, once and for all, for those with genuine complaints. 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.”

A statement from the BBA said:  “We are presently reviewing the judgment very carefully and considering whether to pursue an appeal.” The industry body has 21 days to decide whether to take things further.