Banks flout loan insurance sales rules

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Banks flout loan insurance sales rules

Money Mail
1 December 2010

High Street banks face huge fines for flouting tougher rules on handling payment protection insurance complaints.

Culprit: Lloyds TSB

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PPI was sold with loans and credit cards as a safety net to protect people who become unemployed or too sick to work.

It is estimated two million policies were mis-sold to people who would be unable to claim.

New rules, which come into force today, are designed to prevent firms from continuing to fob off complaints.

Critically, they could force lenders to reopen rejected complaints. But the banks have launched a High Court challenge against the new guidelines.

Trade body the British Bankers’ Association says most of its members will not be abiding by the new standards while they are locked in the legal dispute.

Major lenders, including state-backed Lloyds TSB, have put tens of thousands of complaints on ice, claiming they would be affected by the court case — which is set for late January.

But the FSA told Money Mail: ‘Lenders will not be able to put postbags of complaints to one side. We will apply enforcement action if firms fail to comply.

‘There may be a minority of cases where a complaint has issues which are tied up in the judicial review. But in most cases firms can and should be abiding by the new guidelines.’

The FSA has carried out 24 major investigations and imposed £13m in fines in cases where it believes PPi was mis-sold in recent years.

A BBA spokesman says: ‘Banking groups are putting on hold claims affected by the policy statement pending the outcome of the BBA’s legal challenge.’

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