Banks slammed over PPI compensation
Banks are coming under pressure to settle payment protection insurance (PPI) mis-selling claims after a High Court ruling left them with a £4.5 billion compensation bill.
In what was described as a "huge victory" for customers, the banking industry lost its challenge over whether new rules on mis-selling PPI could be applied retrospectively.
But, in defiance of the Financial Services Authority (FSA), the banks said they would continue to refuse to handle some PPI claims until they had decided whether to appeal the decision.
Martin Lewis, creator of MoneySavingExpert.com, which has long campaigned on the issue, said: "The banks have behaved abominably. The hold has not been agreed by the FSA or Ombudsman, who have both lambasted it."
He called on the FSA to introduce a credible threat to banks that refused to handle the complaints by warning that their licence to do insurance business could be suspended until they processed them.
Peter Vicary-Smith, chief executive of Which?, said the announcement "is a huge victory for consumers". But he said: "Instead of dealing with mis-selling, the banks are trying to wriggle out of paying up using the courts - this now has to stop."
The British Bankers' Association brought the action against the FSA and the Financial Ombudsman Service over new rules which came into force in December, and aim to ensure consumers are treated fairly, both when they buy PPI and when they complain about being mis-sold the cover. The rules also apply to policies taken out before they came into force.
The ruling paves the way for around three million people to receive compensation for being mis-sold the cover.
The FSA estimates PPI providers will have to pay out up to £1.3 billion in compensation for new complaints that are received during the coming five years, and up to £3.2 billion as a result of reviewing previous PPI sales and pro-actively contracting customers to offer them redress.
The British Bankers' Association, which has 21 days to lodge an appeal, expressed disappointment at the outcome. A spokesman said: "We are disappointed with the judgment and now need to consider the details of it very carefully as well as next steps, including whether it would be appropriate to apply for permission to appeal."