This year’s Judicial Review into new Financial Service Authority (FSA) guidelines on the sale of PPI resulted in an unprecedented level of complaints being submitted to the Financial Ombudsman Service (FOS). The Judicial Review was requested by the British Banking Association (BBA) who expressed concern that the guidelines could be applied retrospectively to older PPI sales and may result in 35 insurance companies failing and a cost to the lending industry of £4.5 billion.
The Review was requested in December 2010 following the announcement of the new guidelines by the FSA in August. While the High Court decision was pending, many of the UK’s largest banks opted to place all payment protection complaints on hold. This decision contravened other FSA guidelines that stipulate all complaints must be investigated within 8 weeks. Where customers were left waiting for several months for a decision, many chose to exercise their right to refer their complaint to the FOS for review. This situation resulted in the FOS receiving up to 5,000 complaints per week by March 2011.
In April 2011 the High Court returned its verdict finding in favour of the FSA. The decision left many banks facing huge backlogs of complaints. As a consequence, the FSA opted to give some lenders extensions to investigate complaints. The extensions were granted on a temporary basis and initial given to Barclays, the Lloyds Group and RBS with HSBC later being granted the same rights.
The FSA made it clear from the outset that the extension to investigate complaints were given only so that customers could receive fair and thorough investigation of their complaints. It was also a condition of the extensions that customers must be kept fully up to date with the progress of their complaint and that reports must be submitted to the FSA at regular intervals.