Banks considering judicial review of FSA over PPI

[pompeyfaith]

And now i hear that they are going to seek a judicial review over the ppi misselling fiasco

[EXC]

Re: The Lloyds Banking Group has attracted 288,000 complaints in just six months

And now i hear that they are going to seek a judicial review over the ppi misselling fiasco

It looks that way Exclusive: Banks Consider Taking FSA To Court Over PPI | Kleinman | Sky News Blogs

[Amethyst]

Re: The Lloyds Banking Group has attracted 288,000 complaints in just six months

Good for them (sorry but I agree with it happening ). Should be interesting if they manage it.

The banks' objection to the new regime appears to focus on what they regard as the potentially retrospective application of new rules relating to PPI.
They fear the measures could cost them significant sums in compensation in relation to PPI but they are also concerned that a letter sent by the FSA last December would allow the regulator to retrospectively apply new rules to other products and to regulated firms outside the banking sector..

I dont think the new handbook guidance is retrospective - the ppi measures have to be in place by 1st December and no mention of retrospectivity. The orders to compensate customers are where investigations have found that the firms breached the rules as they stood at the time they were selling the products. Its not that they have put new rules in and are going back to apply them.


The important stuff is in The assessment and redress of Payment Protection Insurance complaints
specifically http://www.fsa.gov.uk/pubs/policy/ps10_12.pdf

our estimate for the cost of our complaint-handling proposals to
industry is now between c.£0.8bn and £1.3bn over five years (from c.£0.7bn to £1.2bn
in CP10/6), and the estimated total cost of our wider package of measures is now
between c.£1.1bn and £3.2bn (from c.£1.0bn to £3.0bn in CP10/6). We would reiterate
the point made in CP10/6 that these costs are not strictly additive.

[EXC]

Re: The Lloyds Banking Group has attracted 288,000 complaints in just six months

I dont think the new handbook guidance is retrospective - the ppi measures have to be in place by 1st December and no mention of retrospectivity.

Me neither. Maybe the article is badly written and that the retrospective issue actually refers to the FSA insisting on firms reviewing closed cases that were under the old rules.

[Amethyst]

Re: The Lloyds Banking Group has attracted 288,000 complaints in just six months

they are also concerned that a letter sent by the FSA last December would allow the regulator to retrospectively apply new rules

What was the December 2009 letter ? I cant see anything in the Dear CEO letters list except about significant influence directors etc but I'm probably being forgetful and its something different.A September PPI letter is mentioned in their January 2010 minutes which came out with the consultation in Sept. nothing in Dec tho ?

[Amethyst]

Re: Banks considering judicial review of FSA over PPI

Banks challange new PPI rules - Legal Beagles Consumer Forum

[pompeyfaith]

Re: Banks considering judicial review of FSA over PPI

Just so that we see both angles here is the BBA response

The BBA said in a statement:

"The British Bankers' Association regrets that today it has had to file papers with the high court asking for some decisions made by the Financial Services Authority and the Financial Ombudsman Service to be judicially reviewed. This relates to the proposed new rules that are due to be implemented at the end of this year on handling payment protection insurance complaints.
"It has unfortunately been necessary to do this because there is insufficient legal clarity about what the FSA and FOS is proposing in this area. Everyone's actions must be assessed on the basis of a proper understanding of the relevant law and regulation and this procedure will bring this about
"We will continue to explore all opportunities for dialogue with the FSA to resolve the industry’s concerns. No one wants to go to court but the law needs to be clear. We hope to get this resolved as quickly as possible."

http://www.bba.org.uk/media/article/...atement-on-ppi

[Turboman]

Re: The Lloyds Banking Group has attracted 288,000 complaints in just six months

The important stuff is in The assessment and redress of Payment Protection Insurance complaints
specifically http://www.fsa.gov.uk/pubs/policy/ps10_12.pdf

Fantastic reference Ame--Thanks very much

Bill/Marshy/Pompey/Nellie---look this up from post 101 onwards--we can use this info

http://www.fsa.gov.uk/pubs/policy/ps10_12.pdf


Turbo

[Amethyst]

Re: Banks considering judicial review of FSA over PPI

Have you not read it before ? Blimey lol. Yes its a very useful doc and shows exactly how redress should be calculated. This is exactly what the banks are arguing against coming into force.

[marshallka]

Re: Banks considering judicial review of FSA over PPI

Seen this before when it was in draft form and lots of very useful information.

[marshallka]

Re: Banks considering judicial review of FSA over PPI

Just read this

In their responses to CP09/23, secured loan brokers had said that the proposed 2.26
measures weigh unfairly and disproportionately on them because:

they received less commission than insurers and lenders from the sale of PPI,

•

who had designed a product which could not be sold compliantly; and
lenders had set commission targets based on volume and penetration for the sale

•

of PPI with loans, and failure by brokers to meet these would have resulted in
the withdrawal of the lenders’ business from them;
– such that we should instruct insurers/lenders to meet some of the brokers’
redress costs in line with

their gain from (mis)sales.

In CP10/6 (at sections 2.15 and 2.22-24), we discussed the position of such loan 2.27
brokers. We concluded that any failings by a product provider did not lessen the
broker’s own responsibilities to sell PPI in a fair and compliant way. We
acknowledged that some loan brokers may fail as a direct result of the cost
impact from our measures.
We received further criticisms in responses to CP10/6, namely that: 2.28
Some of the failings in the open letter are inconsistent with messages from

•

supervisors to some firms in the secured sector; and when certain loan brokers
wrote to us, expressing concern about the single premium PPI policies they were
required to sell alongside secured loans, we did not respond.
Our revised proposals fail to acknowledge the role of insurers and lenders in the

•

manufacture, design, promotion and sale of PPI, or the role of the broker who
Financial Services Authority 35
may have been acting as their agent, and fail to lay any responsibility or liability
for redress at the door of insurers and lenders for inherent product flaws, or for
employing brokers as their agent.
Brokers should have the right to use the complaint forwarding rules in DISP

•

1.7R to provide a mechanism for forwarding PPI complaints to relevant parties
(e.g. lenders or insurers) and then having redress costs allocated among such
‘co-defendants’ in a similar way to court procedure.

And the FSA reponse here

Our response:
Dealings with the FSA
We reviewed a sample of supervisory correspondence and took what was said into account
in considering whether changes to the package of measures were appropriate in the light of
responses to the consultation paper.
Whatever messages from their supervisors may have expressly or implicitly been given to
individual firms in the course of our thematic work, responsibility for complying with the
regulatory requirements concerning the sale of PPI rested with the firms. This is the case
notwithstanding that firms may claim that they continued with certain sales practices or
continued to sell certain PPI policies in reliance on messages from their supervisors. In some
cases firms were specifically warned that they should not rely on us to have identified each
and every respect in which the firm’s conduct failed to meet regulatory requirements, and that
should in any event be clear to firms from the context of our supervisory work. In addition,
we have always been clear that even formal individual guidance from supervisors cannot affect
the rights of third parties (see for example SUP 9.4 in our Handbook).
The proposed Handbook text affects not only the firms in question but also the many
consumers whom, by issuing the proposed Handbook text, we seek to protect and aims
to draw an appropriate balance in the context of our regulatory objectives. We continue
to take the view that the flawed practices we have identified may be detrimental to
consumers. In our view, the objectives of protecting consumers by securing fair redress
for them, and of promoting an orderly resolution of consumer complaints, are compelling
reasons for proceeding irrespective of any reliance that may have been placed by particular
firms on messages from their supervisors.
So we do not see any reason to qualify the application of the open letter (or Handbook
text) to secured lenders or brokers.
The role of insurers and lenders in mis-selling PPI
Concerning provider/distributor responsibilities, where a firm is an authorised general
insurance intermediary, it is not bound, unless by contractual terms, to offer a particular
PPI policy provided by a lender. Indeed, in some cases, doing so may not be treating
customers fairly.

37 Distributors are responsible for maintaining a compliant sales process,

and therefore should be responsible for redress, where a failing arose from the manner in
which the product was sold. If brokers feel that undue pressure was placed upon them by
lenders or insurers, they may separately have recourse to the courts if they so choose.

37 See for example: http://www.fsa.gov.uk/pubs/other/ppi...tic_update.pdf, page 11; and
http://www.fsa.gov.uk/pubs/other/ppi_thematic.pdf, page 10
36 PS10/12: The assessment and redress of PPI complaints (August 2010)
The issues in relation to agency law (e.g. whether the broker is acting (as agent) on the
part of the insured or the insurer (as principal)) are complex and fact specific, depending
on both the individual contractual arrangements between the parties and the specific
facts surrounding a particular sale. Again, brokers may separately have recourse to the
courts if they so choose.
Accordingly, we remain of the view that our Handbook text concerning PPI complaints and
redress is appropriately positioned in its emphasis on the seller of the policy, and we are not
making any changes to it in this regard.
Brokers have the right under DISP to forward PPI sales complaints to other firms
DISP 1.7.1R permits a firm to forward a complaint to another firm where it has reasonable
grounds to be satisfied that that other firm may be solely or jointly responsible for the
matter alleged in the complaint.
Insofar as a complaint is about the failings set out in the open letter and our Handbook text
we take the view that the ‘matter’ complained of is about the sale of the PPI, as opposed
to a complaint about the underlying product. In our opinion, such a complaint is properly
directed at the firm who sold the PPI and therefore firms are unlikely to have grounds to
forward that complaint on under DISP 1.7.1R.

Now I wonder what this means for complaints (sales by unregulated brokers) that FOS are accepting against insurers?

[Bill-K]

Re: Banks considering judicial review of FSA over PPI

I've probably not grasped it properly, but this seems to make it clear that a complaint about mis-selling is just that - and is not a complaint about the product itself. The FOS just deals with mis-selling, of course, and I guess that - where the seller of the product is not able to provide redress - then the provider of the product must provide it directly to the claimant, instead of through the third party/parties. Perhaps though, in such cases, the redress might be limited to just the cost of the product (plus 8%), but not include debited historic account interest.

Turbo and I have used the simpler FOS guidelines, as it is the FOS whom we are dealing with primarily with PPI claims. Despite the more comprehensive nature of redress procedures given here, there appears to be no directive that the claimant should be given details of how any refund is calculated, in order to make an informed decision as to the fairness of the offer of redress. The simpler FOS guidelines do actually include such a directive, and I think this is important.

[*MF*]

Re: Banks considering judicial review of FSA over PPI

I post this with an apology to EXC to whom on another thread I ask for forbearance on answering questions (pro tem) while I finish a blog I am writing on the issue of bank charges. I hope to have it completed within the next week or so and can then come back on and address the issues that arise.

May I however break my self imposed rule to make this comment:

My 2p:

There is imo a direct correlation between this issue over PPI and that of Bank charges - what the Banks are now challenging are the FSA rules and principles, and per Amethyst's link above you will find this extract from the FSA:

Principles and liabilities

We do not agree that breaches of the Principles do not give rise to liabilities, and consider that the complaints handling rules do require a firm to uphold a complaint and pay appropriate redress when the conduct in question was in breach of the Principles.

May I apologise again for not going further just yet - but I know that many members on here have more than an adequate knowledge of the detailed issues over both PPI and Bank charges - and I hope even just including that one quote - tied in with the blog (even unfinished as it stands today) may give them food for thought, and give them a better idea of where I am heading - and I will get there as soon as I can.


*EDIT*

Link is relevant: http://www.competition-commission.or...ss_release.pdf

[Amethyst]

Re: Banks considering judicial review of FSA over PPI

Principles and liabilities

We do not agree that breaches of the Principles do not give rise to liabilities, and consider that the complaints handling rules do require a firm to uphold a complaint and pay appropriate redress when the conduct in question was in breach of the Principles.

That's ref the PPI work. Interesting re the Consumer Redress Scheme work they have said - makes absolute sense to me, and means the actions on consumer redress can be taken with regards PPI as AS WELL AS breaking a number of principles of the FSA it has also been ruled in court that it creates an unfair relationship in certain circumstances (under CCA 1974) and I believe may be (in non optional cases) construed an unfair term under UTCCR. So the breaches of the principles of TCF and regualtions are there, the situation meets the legally-actionable requirement.

7.11 The fact that a consumer redress scheme cannot be used to require redress in relation to breaches of the FSA’s Principles would not prohibit a consideration of the Principles for the purposes of interpreting one of the FSA’s more detailed rules. This is because the FSA thinks that a court would also take into account surrounding legislative provisions when seeking to interpret a particular piece of law. However, this does not mean that the scheme could be based on the Principles – there always needs to be a breach of a legally-actionable requirement.