Reclaim thousands after PPI court ruling

The banks have lost a High Court judicial review concerning the mis-selling of Payment Protection Insurance. This victory for consumers could enable you to reclaim thousands....

The issue of mis-sold Payment Protection Insurance (PPI) has hung around like a bad smell for years.

It’s estimated that hundreds of thousands of people have been tricked into paying for it. Yet when they try and reclaim this wasted cash back from the banks, they're more often than not told to get lost.

Until now that is.

The trade body of the banks, the British Bankers’ Association, has lost a crucial High Court judicial review deciding how PPI complaints are dealt with. This is a welcome victory for the City watchdog, the Financial Services Authority (FSA) as well for consumers and could increase the ease with which you can reclaim thousands back from your bank.

But don’t get too excited, as the BBA has stated that it will be appealing the decision and keeping existing complaints on hold.

What is PPI?

PPI provides cover against missed repayments on credit cards, mortgages and loans in the case of accident, sickness or unemployment. It can be valuable cover – if you need it, that is.

This judicial review has come about because of banks covertly bundling PPI in with other credit products and flogging it at massively inflated prices to customers who don’t really need it. At the height of the boom years it’s estimated that the banks were pocketing billions every year from the mis-selling of PPI.

It’s no surprise therefore that since the FSA began supervising the PPI sector back in 2005 there have been over 1.5 million complaints made about this rip-off insurance. Yet, on average firms have rejected around 60% of these complaints.

This all came to a head last year when the FSA introduced new rules to be used by banks to judge whether PPI policies sold in the past had been mis-sold. The City watchdog estimated that – if fully adopted – these new guidelines could lead to over £3 billion of compensation for PPI customers.

However the BBA rejected these changes and requested a High Court judicial review, arguing that it was unfair to apply new rules to old cases.

But unfortunately for the banks, the BBA lost.

What does this judgement mean?

On paper, this judgement means that banks will now have to use the guidelines laid out last year by the FSA to judge whether PPI has been mis-sold or not. When the banks have determined these cases, they will have to actively contact the customers and offer them compensation – even if no complaint has been made.

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This should mean that all of the complaints put on hold by the banks in October last year (with the exception of Santander who is not involved in the legal action as it is already processing complaints in accordance with FSA rules) are re-opened and dealt with. And if a bank is unable to progress with a complaint they will now be forced to inform the customer if it can be referred to the Financial Ombudsman Service (FOS). From here the third party FOS will decide on the outcome of the complaint.

The FSA have confirmed that any failure to comply with these guidelines will result in enforcement action.

But in reality the banks are still trying to squirm out of these obligations. In response to the ruling the BBA said, ‘any complaints directly affected by the judicial review will be placed on hold until the next [legal] steps have been decided.’

The BBA are also considering lodging an appeal against the decision, so while today’s judgement is a step in the right direction for mis-sold PPI victims, it’s by no means a battle won.

Where now?

The FSA have said that rules in their handbook state that banks are able to keep complaints on hold as the legal process is not over yet. However the watchdog will not be completely sitting back, as they have stressed that firms cannot rule out all complaints – and where they can deal with one, they should.

So if you are currently awaiting a reply from your bank concerning a PPI complaint then you should keep pestering them for a response. And if they reject your complaint or put it on hold, you do still have the right to go to the FOS.

But if you do take this route, you should be aware that you may be waiting a while for a response due to the sheer volume of cases the FOS is currently dealing with.

And if you think you’ve been mis-sold PPI find out how to make a complaint by reading Reclaim unfair charges and save thousands.

More: How to make a Super Complaint | What to do when ATMs give you the wrong money | Say goodbye to sneaky card charges