Payment protection insurance

In The Queen on the application of British Bankers Association v The Financial Services Authority and Anr (interested party Nemo Personal Finance Ltd) [2011] EWHC 999 (Admin), Ousley J batted back a rare challenge by the industry to the powers of its regulators in relation to payment protection insurance. The case is discussed by Dr Judith P Summer, non-practising solicitor and author of Insurance Law and the Financial Ombudsman Service.

Payment protection insurance

Following the widespread mis-selling of payment protection insurance, and the FOS referring the matter to the FSA under a ‘wider implications process’ by letter of 1 July 2008, the FSA took action. On 10 August 2010, and following consultation, the FSA published Policy Statement 10/12 ‘The assessment and redress of Payment Protection Insurance Complaints’. It included amendments to the FSA Handbook rules on the way that firms are required to deal with policy sales by way of the addition of Appendix 3, guidance about how PPI sales complaints should be handled, the basis on which they should be decided and an Open Letter. Under para 3.6.2E of the Appendix, evidence of a substantial flaw was rebuttable evidence that the policy would not have been bought and that compensation was due. The Appendix gave 12 examples of such ‘Substantial Flaws’ in the sales process. The Open Letter identified ‘Common Failings’ which from the FSA experience might indicate that a mis-sale had occurred. A further FSA letter of 24 November 2010 clarified that the Common Failings were not a substitute for a full assessment of the claim and were intended to help firms comply with their obligations.