Banks abandon PPI complaints challenge

The banking industry has withdrawn from a legal fight over PPI complaints

The banking industry has abandoned a legal fight over the mis-selling of payment protection insurance (PPI).

The British Bankers’ Association, which fought the case, said it would not appeal after losing a court challenge against new rules on mis-selling.

The announcement follows recent news that Lloyds Banking Group and Barclays would not have lent their support backing any appeal.

The BBA had until tomorrow to lodge an appeal with the High Court.

The BBA says: “The BBA on behalf of its members judicially reviewed the FSA and the FOS regarding the retrospective elements in the proposed FSA rules for handling PPI complaints. The judgment was handed down on April 20 and found in favour of FSA and the FOS. The BBA was given until May 10 to appeal.

“In the interest of providing certainty for their customers, the banks and the BBA have decided that they do not intend to appeal. We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities.”

Last week, Lloyds Banking Group made a £3.2bn provision for possible claims.

Barclays’ chief executive Bob Diamond said today that the bank would now begin the process of compensating customers, after setting aside £1bn. HSBC announced a compensation fund of £269m, while Royal Bank of Scotland said it too would not contest the court ruling.

RBS confirmed on Monday that it would also be addressing customers’ complaints, but said it had yet to decide how much to set aside for possible claims.

“We are already in discussions with the FSA to clarify its requirements and the implications for our customers and shareholders,” the bank said.

Nationwide distanced itself from the banks that tried to challenge the FSA.

It said it had continued to process new PPI complaints while the High Court case was being heard, pointing out it expected to pay only £10m in compensation.

“Looking at the FOS complaints league table (for the second half of 2010) the society is ranked 102 out of 106 firms based on fewer than 650 complaints,” said a spokesman for the society.

 

“Thirteen per cent of the society’s complaints were upheld by FOS in favour of the customer, compared to an industry average of 63%.”

Although the FSA can only enforce its rules on sales made after January 2005, when it took over regulation of PPI sales, customers can still complain to a bank about sales before then.

The FSA has previously estimated that the banks will have to pay up to £4.5bn to settle tens of thousands of claims, a figure that now appears to have been an underestimate.

The regulator requires the banks and other PPI sellers to look at all past sales and, if there is any evidence of “systemic” mis-selling, to write to the affected groups of customers and invite them to make a claim.

This means that not all past customers will be contacted directly, as not all policies were mis-sold in the first place.

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