You may have noticed in the news recently that the high street
banks have lost a long running legal battle with the Financial
Services Authority (FSA), regarding the way in which Payment
Protection Insurance (PPI) is sold to consumers.
The problem with this situation is that there is very little
understanding about the fine details of the case for the millions
of people who were mis-sold PPI Policies, and who may be entitled
to compensation. Most of these people probably know very little
about the background of this case and its implications.
PPI is a highly controversial financial product which was
originally designed in order to help people carry on with their
repayments for certain debts in the event that they lost their
income as a result of an illness, accident or being made
redundant. PPI allows the consumer to pay a small monthly premium
per thousand pounds of debt insured, and once an initial qualifying
period had passed, the insurance company would meet the repayments
on that debt if the consumer was unable to work due to unforeseen
circumstances.
The trouble was that PPI companies often inappropriately sold
these policies by forcing customers to take them out with a loan or
other types of credit products, or by misleading consumers into
buying more expensive policies which were completely unsuitable but
resulted in the salesman receiving a higher commission bonus.
Back in 2005 the FSA took over the regulation of PPI selling and
produced detailed guidelines and rules about how PPI should and
shouldn't be sold. Any company in breach of these rules would be
found guilty of mis-selling and every consumers affected would be
able to make a claim against the PPI company for a full refund.
However, many financial companies continued and increased the
mis-selling of PPI and in 2010 the FSA imposed stricter rules which
would apply to all past PPI sales. The FSA also proposed that banks
should also review their past sales and contact any consumers who
were potentially affected by PPI mis-selling to advise them how to
make a claim.
The major high street banks were in dispute about the new rule
and argued that by applying it to old sales was unfair. The banks
decided to launch a judicial review in the High Court, in which
they asked a judge to rule that the FSA had acted unfairly and
unlawfully by introducing retroactive rules. During the course of
the legal action, the banks stopped processing all complaints about
mis-sold PPI complaints, stating that the outcome of these
complaints could be affected by the result of the Judicial Review,
although in actuality the FSA's new rules had no bearing on the
vast majority of these claims.
In April 2011 the High Court rejected the banks' case, although
they continued to place PPI complaints on hold until 9th
May when they announced that they would not be appealing this
decision. As a result of this climb-down, PPI companies must now
resume the processing of complaints about mis-sold PPI and must
begin to implement the FSA's new rules.
This result means that if you have made a claim for mis-sold PPI
but it has been placed on hold by the PPI company, you should
expect your case to commence as soon as possible. The major banks
and insurance companies are reportedly taking on thousands of
temporary staff to help deal with the massive backlog of
unprocessed claims which has built up over the last several months,
as well as the expected increase in new claims.
The outcome of the Judicial Review also means that if you
purchased a PPI policy, you may shortly be receiving a letter from
the PPI company explaining that you may be entitled to a refund if
the policy was mis-sold to you. The letter should give you detailed
instructions on how you can make a complaint.
However, if you do not receive a letter it does not necessarily
mean that you do not have a claim. The PPI companies are not
required to write to every single customer that has taken out a PPI
policy, they only have to contact those customers they believe to
have been at the greatest risk of being mis-sold PPI. Because of
this loophole the banks and other financial institutions involved
in the PPI mis-selling scandal will want to minimise the number of
people they give refunds to and so they are likely to adopt
restrictive criteria when deciding who to write to.
You do not need to wait for the company which sold your PPI
policy to get in touch with you, it is perfectly fine to make a
claim for mis-sold PPI, if you think that the PPI company which
sold your policy acted unfairly or sold you a policy which was
unsuitable for your needs.
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