Banks Ponder Appeal, FSA Statement and No More Free Accounts

Following the release of the judgment in the Judicial Review action against the FSA, banks are clearly holding meetings with their lawyers to decide whether to carry on their court fight.

The British Bankers' Association (BBA) only has until 10th May to ask for permission to appeal after the High Court rejected its claim that new rules for handling complaints about the mis-selling of PPI were unlawful.

They are under huge pressure from the Financial Ombudsman Service FOS not to delay the progression of the cases any longer. The Chief Ombudsman, Natalie Ceeney, says 'fighting on will damage the banks' reputations further'. Miss Ceeney went on to say 'Now we have a clear-cut ruling, we need to work together to resolve these complaints as quickly as possible. It will greatly benefit all of our reputations to do so.'

The FSA also released a statement stating the decision "signals the end of years of poor payment protection insurance complaint handling" and would "trigger a dramatic improvement in the way customers are treated when complaining". The FSA went on to say that their "primary aim has always been to get proper redress, once and for all for those with genuine complaints."

They reiterated they had not put a waiver in place to allow banks not to progress PPI complaints and warned banks they would suffer enforcement action if they failed to investigate complaints fully.

The outcome as it stands is that the Judge found that the Ombudsman has an extremely broad discretion when assessing consumer complaints; firms must take account of the FSA's Principles for Business in addition to the specific conduct rules in their complaint handling processes and firms will need to pay very close attention to the Principles when assessing a sale of regulated products even where there are specific rules which apply. As such, it is clear that although the Judge took particular note of the provision that the Principles could not give rise to a cause of action in a Court, the Principles still had an overarching role in the regulation of banks and so should be used as a factor in the determination of complaints.

Whatever happens on or before the 10th May, at least the matter will be progressed and we will be able to see some movement.

Some more reports have been surfacing signalling the end of free banking and current accounts charging customers a fee now outnumber those that do not. There are now 58 free accounts open to customers, down from 65 in 2009.

Meanwhile, providers have increased the range of packaged accounts that levy a monthly fee in return for additional benefits such as free travel insurance. Furthermore, the prices charged for those accounts are also rising. In 2006, the average packaged account cost just over £10 per month. Now customers pay more than £15 on average – and a range of providers, including Barclays, NatWest and RBS, charge even more.

In 2008, the Office of Fair Trading estimated that banks made on average £152 per current account as a result of interest, fees and charges. This more than covers the cost of so called 'free banking' for its customers. But lost revenues from other areas need to be recouped and so we may start finding ourselves stuck with one or two banks who offer these free accounts, limiting our choice across the marketplace.