You may have heard in the news about the outcome of a legal
challenge in which the main high street banks where trying to
reduce the number of people who are making successful compensation
claims for mis-sold Payment Protection Insurance (PPI).
This dispute arose because the regulator for the financial
sector, the Financial Services Authority (FSA), created new rules
about the sale of PPI policies. The FSA stated that in reality
these new rules simply clarified and articulated existing
principles which financial services providers had always been
required to abide by. The FSA wanted these new rules to be applied
retrospectively and had required PPI companies to review all their
past PPI sales in order to identify customers who might have been
victims of PPI mis-selling under the new retro-active rules, before
writing to these customers and inviting them to make a claim.
The bank's felt that this was unfair and the lawfulness of past
sales should only be judged by the rules which were in force at the
time. The Banks asked the High Court to start a judicially review
about the legality of the FSA's new rules and in the meantime they
refused to process any new PPI claims.
But in April 2011 the Banks lost their case and the following
month all the Banks released statements indicating that they would
not be appealing against the court's decision.
What does this mean for PPI policy
holders?
The Banks are now required to put into practice the FSA's
requirements regarding the review of past sales and will need to
write to customers that are were most at risk from mis-sold PPI and
invite them to make a claim for compensation. The Banks are
currently in discussions with the FSA about how they will put these
new requirements into force. The decision by the banks not to mount
an appeal also means that they must begin processing complaints
about mis-sold PPI once more.
What if the PPI company doesn't get in touch with
me?
Just because the company that sold the PPI to you doesn't write
to you explaining that your policy may have been mis-sold to you,
it doesn't necessarily mean that you are not entitled to a refund.
The PPI companies are not required to write to every customer who
has ever purchased PPI, they only need to contact those who they
consider to be at the highest risk of being mis-sold a PPI
policy.
It is in the interests of the PPI companies to minimise the
number of people who receive compensation, and so they are likely
to adopt a very strict test when deciding who to write to. It is
more than likely that they will only write to customers in the most
obvious and indefensible cases of mis-selling and will ignore many
millions of other consumers who might have a strong claim for
compensation.
If you have a PPI policy there is no need to wait for the policy
provider to contact you about a refund - you have the right to make
a claim for PPI mis-selling as soon as you want by making an
official complaint to the PPI provider. If your claim is rejected,
or if the PPI provider fails to respond then you will be able to
refer the matter to the Financial Ombudsman Service; an independent
complaint handler set up by the government to adjudicate complaints
by consumers about financial businesses which have acted unfairly
or have breached the FSA's rules.
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