Banks Lose, What Next ?, Doomsday - no more free banking !

The fog still needs to clear, but it has become apparent that the Judge has made some precise and specific assessments of the arguments formulated by the BBA, FSA and FOS. He has arrived at a measured, reasonable conclusion taking into account all the material information presented to him and has arrived at a decision which benefits the consumer. Whilst the judge was clearly persuaded by some of the BBA's arguments, he ultimately felt that the FSA Principles could be used in the determination of PPI complaints. He went further to say that even if the Principles couldn't be used, the Ombudsman could still assess claims on what was a 'fair and reasonable' outcome to all parties involved - essentially, FOS could arrive at any decision it wanted.

Regardless, this all means very little if the banks decide to appeal the High Court decision. They have until 10th May to do so and the chances are very likely. The banks will be able to delay the final decision further and will be at least 8-10 months before the appeal is heard. However, on the other hand, there is an immense amount of pressure on the banks to begin paying compensation again and that media pressure may well be too much for the banks' PR departments to handle. Whatever happens, will happen very soon, and at least we can be sure that this huge bottleneck will be moved forward in some respect.

However, as the decision was released, free banking was set to be under threat that the outcome of the Judicial Review will could cost the banks £4.5billion. Some believe that the losses will be recouped from customers through more expensive banking and even the end of free current accounts.

It is already becoming common for customers in the UK to not have free current accounts and banks presently charge between £3 and £25 a month for account services (like travel insurance and car breakdown cover), guaranteeing them millions of pounds a year.

Banks Lose Judicial Review !!!

Great news surfacing throughout the press.

The BBA appears to have lost its legal challenge against the FSA in respect of Payment Protection Insurance complaints.

Likely to be appealed - but a fantastic result for the victims of mis-selling throughout the UK.

Big Decision Soon, Lots of Levies, FSCS Changes and New Rules for PPI

Big news this week is the likelihood that the Judicial Review decision will be handed down on Wednesday (tomorrow). I expect the decision will provide an element of clarity on the state of PPI complaints, but its still likely to be appealed to a higher court.

The Financial Services Compensation Scheme has this week set the 2011/12 levy on general insurance intermediaries at £69.5m. This is the amount the industry will be expected to pay to help the FSCS meet its commitments. Last year the levy for insurance brokers rose to £61.4m - mainly due to cover the costs of payment protection insurance (PPI) claims.

Despite some reports alluding to panic that brokers wouldn't be able to cope with the increased levy, it is clear that the final levy is some £23m less than originally projected and so more palatable throughout the industry. Furthermore, with the FSCS intervening earlier in firms who are likely to go into default, there is a greater chance (as in Welcome's case of some money being set aside for future claims).

Similarly, the FOS has also had to increase its levy on the industry which has been met with some criticism from the The Association of British Insurers.
In January, the FOS confirmed it was seeking a levy increase of up to £30m.
But last week, the FSA approved a £25m increase for 2011/12 to fund reserves so the ombudsman can deal with an expected surge in payment protection insurance complaints.

The ombudsman said before the levy was introduced that the loss of income from case fees as a result of the judicial review would exhaust its reserves within six weeks. Hopefully, the extra cash will enable FOS to deal with each complaint in a more timely manner.

Alan Meale, Labour MP for Mansfield and Mark Durkan MP for Foyle have called on the government to immediately begin its promised review of the FSCS. They have highlighted the increased levy as a catalyst to scope out the potential for significant changes in the way in which the FSCS is managed.

The new rules set out by the Competition Commission to introduce competition into the payment protection insurance (PPI) market have came into effect.

It has been ruled that PPI be banned at the point of sale until seven days after the sale and has further ruled that there must be a seven day gap between a PPI quote being issued and the sale. These quotes must set out the cost of the policy along with details of the cover provided and supply information in marketing material about the cost and key messages, for example making it clear that PPI is optional and available from other providers.

It has further been ruled that providers are obligated to provide information about claims ratios and are totally prohibited from selling single-premium PPI policies. Insurers must also provide an annual review setting out the cost of PPI and including a reminder of the consumer's right to cancel.

Un-Welcome, the Importance of IP, FOS Levy, Bad Barclays and Lloyds getting better!

The blog had a week off - but back now with more stories! Its been a busy couple of weeks in PPI. I initially commented on Welcome's current predicament a few weeks ago. Welcome have been declared in default which would have meant that any claim against them for PPI compensation should now be made to the Financial Services Compensation Scheme (FSCS). The FSCS would normally look to pay out individual compensation claims on behalf of a business, once that business has been declared in default (ie, not able to pay claims made against it). The problem is that the FSCS intend to use any compensation to reduce the balance of the customer's loan account. This isnt unreasonable, as the customer benefits from being able to repay the loan earlier - but given most loans are refinanced regularly, the client will miss out on a cash settlement. This is likely to put customers off from claiming - especially when they are sent a long complicated FSCS application form directly to complete. Alan Lakey of Highclere Financial Services made comment about the important of Income Protection Plans and how more IFAs (and in my opinion, banks) should look to prioritise protecting the consumer before selling them packaged accounts, investments or other finance. There are some fantastic protection plans in the marketplace which can cover you for accident, sickness or unemployment for a specific amount every month until you return to work. It is important these policies arent tainted with the same brush as single premium PPI sold on loans and other finance. They have real benefits in difficult times and should be taken more seriously in these uncertain economic times. Unsurprisingly, the Ombudsman's levy has increased. Essentially, the FOS needs money to process claims and the sheer volume which it is presently dealing with means it needs a lot more to function properly. 30% of the levy is coming from banks, building societies and mortgage lenders, 37 per cent would be paid by general insurance intermediaries, and 12 per cent by general insurers. This seems to be a fairer spread across the industry to account for the increased levy and should allow the FOS to push ahead with its cases. Barclays has been flagged as Britain's most complained about bank with 276,315 complaints raised against it in the second half of 2010, according to the Financial Services Authority. The second worst offender was Santander with 195,475 complaints, taking the total number of grievances involving high street banks to more than a million or 5,750 per day. This is a welcomed change as Lloyds used to head the league table of complaint data with its appalling record! On the other hand, Lloyds, with their new chief executive, wants to cut complaints about the bank by 25%. This can only benefit the consumer and I welcome his enthusiasm - hopefully his target will be dramatically exceeded - Lloyds have certainly got a lot of work to do! If you want to make a claim about your PPI, visit www.ppireturn.co.uk to begin your case.