Tens of thousands of consumers who have lodged payment protection insurance (PPI) mis-selling complaints face delays in having their disputes resolved as banks mount a legal challenge against new complaint handling rules.

PPI Compensation Claims suspended

 

The British Bankers’ Association (BBA) the industry body, said on Wednesday that complaints which would be directly impacted by its request for a judicial review ‘cannot be resolved at this point’.

The announcement comes days after the Financial Services Authority, which is contesting the judicial review, ordered banks to continue handling PPI claims while the legal challenge was underway.

The BBA said its members ‘would continue to handled all PPI-related complaints in accordance with the FSA’s rules’, but those whose outcome would be affected by the legal challenge would be treated differently.

‘There will be some complaints which will be directly impacted by the judicial review, and which cannot be resolved at this point,’ said the BBA. ‘If your complaint is among these, your bank will write to inform you.’

However it added: ‘Customers should be assured that all complaints will be reviewed – even those delayed by this judicial review process.’

The BBA did not make clear which claims might be put on hold.

But some legal firms, which deal with PPI compensation claims, say all their claims have been suspended.

‘We called Lloyds for an update on an existing claim and they basically said that we are not doing anything at all with existing claims while the judicial review is taking place,’ said James Kafton, chief executive of PPI Claimline, a compensation claims firm.

‘It’s very difficult to know what to tell customers as the FSA said that it expected complaint handling would be unaffected by the judicial review.’

Another claims company said thousands of its customers claims had been left in limbo.

‘We have been told that all our existing claims have been put on hold,’ said Mike Ransom, managing director at Investor Compensation, a claims firm.

‘The lack of clarity about how these claims should be dealt with is alarming.’

Lloyds Banking Group which includes Lloyds TSB and Halifax, and HSBC, the world’s biggest bank, have pubically stated that they back the BBA’s line.

Santander, the Spanish-owned bank, however, is not getting involved in the legal action being pursued by a number of UK banks and said ‘we will continue to deal with any issues our customers put to us regarding PPI in accordance with FSA rules.’

PPI is designed to cover loan repayments for unsecured debts in the event of accident sickness or forced redundancy.

However, since the FSA took on regulation of PPI in 2005 it has taken enforcement action against 24 firms largely for mis-selling.

In the last five years there have been more than 1m complaints made to firms about PPI. In 2009/2010 alone, customers referred 49,196 complaints to the Ombudsman which then upheld nine out of ten in the complainant’s favour.

The FSA said it ‘strongly’ believed that a package of new complaint handling measures, announced last year, was a ‘sensible and fair solution’ for consumers and the industry alike.

The FSA said: ‘We repeat that firms are expected to continue handling complaints while the judicial process is ongoing customers,’ said the FSA.

‘Customers who are unhappy with the way their complaint has been dealt with can take their cases to the Ombudsman.’

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.