British Bankers' Association (BBA) v Financial Services Authority (FSA) and Financial Ombudsman Service (FOS)
Payment protection insurance (PPI) is insurance sold by banks alongside credit cards, loans and finance agreements and aims to insure that payments are made should the borrower be unable to make the payments through illness or unemployment.
However many policyholders claim that the insurance is useless and they are unable to claim owing to restrictions of which they were unaware at the time of purchase, such as being over 65 years old or being self employed. Other customers claim that they have been pressurised into buying the insurance or have paid the premiums without being aware that they had purchased it.
This potential mis-selling was recognised by both the FSA and FOS and steps were subsequently taken to introduce a set of rules governing claims of mis-sold PPI. The banks, through BBA, challenged these principles with a judicial review on the basis that the principles forced the banks to apply new standards to sales made before the rules were established.
In a judgment handed down by the High Court on 20 April 2011, BBA's objections were dismissed and the court ruled in favour of the FSA and FOS. The banks have an obligation to sell fairly which they breached. The FSA principles intend to redress those breaches and prevent future breaches from occurring.
The FSA rules intend to ensure that customers are treated justly both when buying PPI and when making complaint about mis-selling. The rules, (and the subsequent decision of the High Court), mean that anyone who was previously mis-sold PPI should be compensated, and further indicate that banks should contact all past PPI customers and give them the option to complain if their policy was mis-sold.
The banks have frozen the processing of claims during the judicial review process however, at present the High Court's decision is clear and the FSA have not introduced a waiver meaning that the banks should be processing all claims in relation to mis-sold PPI.
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