The Banks\’ Failed Legal Challenge Regarding PPI


Nik Jones

The United Kingdom\’s major high street banks have been hit by a large compensation bill as a result of their previous mis-selling of payment protection insurance (PPI).

Rather than accept the need to pay potentially billions in compensation, not surprisingly the banks tried to limit the damage by pursuing legal action.


In October 2010, the British Bankers\’ Association (BBA) launched a legal challenge against the Financial Services Authority (FSA), the UK\’s financial services regulator, on behalf of a number of well-known banks. Secured loan provider Nemo Personal Finance joined the BBA in pursuing the legal challenge.

The case concerned a number of new practices which the FSA had imposed on firms in August 2010 when considering PPI complaints, which included the need for firms to review past PPI complaints again. One of the main features of the FSA\’s instruction was that previous complaints needed to be re-assessed according to whether the FSA\’s high-level principles had been followed, as well as whether the policy was sold in accordance with its detailed rules regarding PPI. The BBA and Nemo contended that it was unfair to retrospectively introduce obligations on firms.

In January 2011 the FSA wrote to relevant trade associations saying that it had become aware that, in many cases, PPI complaints were being put on hold by firms while the outcome of the judicial review was awaited. The FSA\’s letter made it clear that this was not acceptable. It went on to say it still expected firms to fully and fairly investigate issues raised by customers making a PPI complaint, and to issue a PPI refund letter where appropriate, within eight weeks of receipt, and to make complainants aware of their right to refer the matter to the Financial Ombudsman Service.

Judgement was issued by the High Court in April 2011,rejecting the BBA and Nemo\’s case. In May 2011, the BBA and Nemo announced they would not be appealing against the ruling. This means that financial institutions who have sold PPI are required to fully and fairly investigate any complaint received regarding the sale of the product, in accordance with the revised FSA guidance, and to offer appropriate redress where it finds in favour of the customer. Making a PPI complaint has never been easier.

As a result of the backlog of complaints that the banks had accumulated during the legal challenge, over the summer of 2011 the FSA was forced to allow each of the \’big four\’ banking groups – RBS, Lloyds, Barclays and HSBC – extra time to resolve their complaints, and for a limited period they were allowed 12 or even 16 weeks to investigate complaints. However, the usual eight week limit was re-introduced in 2012.

PPI Refund 4 Me

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