UK banks have today lost a judicial review that could have a major impact on whether more compensation has to be paid by them in relation to mis-sold loan insurance. The High Court handed down their judgment today, which means that banks will now have to look back at past sales of Payment Protection Insurance (PPI), whether or not their customers have complained.
Some estimates have said this could lead to a £4.5bn bill for the banks. The banks have 21 days to appeal the decision to the Court of Appeal, which given the impact of the decision, I think they are likely to do.
As a solicitor dealing with disputing Consumer Credit Agreements and loans, I think this is a great result for consumers, who may now find it easier to get a refund of the PPI premium which was added to the loan, plus any interest that they have already paid on it.
There can be many reasons for a policy being mis-sold. The most common are as follows:
- The customer may have been told that the PPI was compulsory and that they could not have the loan without it.
- The policy may have been sold to a customer who was unemployed or self employed, at the time the loan was taken out, which usually means that no claims can be made under the policy.
- The policy may have been sold to someone who was already suffering from a significant illness at the time the loan was taken out, and that this may then invalidate any claims under the policy.
- The cost of the PPI may have been grossly expensive in relation to the amount of the actual loan, and cheaper policies may have been available in the open market.
Thousands of people have already received compensation because they were mis-sold PPI policies. The Financial Services Authority issued guidelines last year, which said that the banks should contact customers themselves if they thought that a policy may have been mis-sold, rather than wait for the customer to complain. The banks therefore issued judicial review proceedings, to challenge these guidelines. The challenge was rejected by High Court judge, Mr Justice Ouseley.
The chief of the Financial Ombudsman service has said: "This judgment is very clear-cut - and it confirms that the ombudsman's approach to PPI complaints is right. People have been waiting a long time while the banks' legal action has been ongoing. I would now like to see financial businesses showing real commitment to sorting out their customers' complaints efficiently and promptly."
This High Court judgment, providing it is not successfully appealed, will affect millions of bank customers.
According to the Financial Ombudsman Service, they have had over 200,000 mis-sold PPI cases referred to them in recent years, and 100,000 of those were in the past financial year. They now receive around 5,000 claims each week, and have confirmed that in the past, around three in four complaints have been upheld. The Financial Services Authority have confirmed that they have dealt with around 1.5 million complaints about PPI since 2005.
In some cases that I have dealt with recently, the lenders have been stalling providing any final response to the complaint, pending the outcome of these judicial review proceedings. Following the High Court’s decision today, the Financial Ombudsman Service commented that there should no longer be any stalling over fresh cases.
How to claim
- Not everyone was mis-sold payment protection insurance - it was appropriate for some people
- If you think you were mis-sold PPI, you should complain to the bank or loan provider that sold it. If you need assistance with this, you should contact our specialist consumer litigation team on 01616 966 229
- If, after eight weeks, there is no response, or there is a response that you are unhappy with, then a complaint can be made to the independent Financial Ombudsman Service