Finance industry welcomes the decision to drop PPI legal action

The decision today (Monday May 09) by the British Bankers Association on behalf of its members to drop its legal action over the handling of complaints over Payment Protection Insurance (PPI) has been widely welcomed.

Last month the courts ruled that customers who were mis-sold PPI policies, many because they didn’t need them, could receive compensation, opening the way for claims of at least £4.5 billion. But the BBA said it would consider an appeal. Now it has decided against continuing with the legal action.

In a statement the BBA said; ‘In the interest of providing certainty for their customers, the banks and the BBA have decided that they do not intend to appeal. We continue to believe that there are matters of important principle which we will be taking forward in other ways with the authorities.'

PPI policies were sold alongside mortgages, loans and credit cards and were designed to repay people's borrowings if their income fell because they became ill or lost their jobs. But they were sold to people who would never need them such as the self employed, making huge profits for the banks.

Adam Scorer, head of external affairs at Consumer focus said it was a matter of the banks finally seeing sense over the issue. ‘The entire episode is an embarrassment for our High Street banks. It is now time to wipe the slate clean, pay up and look to learn lessons for the future. PPI highlights that people find it difficult to understand everyday financial products. Banks need to offer more consumer friendly accounts and services which do what they say on the tin,’ he declared.

‘Refunding billions of pounds to millions of people will be a mammoth undertaking and to get it wrong would add insult to injury. We are calling on the banks to put aside the resources that are going to be needed to ensure people get their money back quickly and efficiently,’ he added.

Kevin Mountford, head of banking at moneysupermarket.com said it was a major victory for the thousands of potential claimants who were mis-sold PPI on loans or cards. ‘With the banks now prepared to deal with this issue, customers can now move forward, get in touch with their providers and start to recoup some of the money they unfairly lost,’ he said.

‘The mis-selling of PPI has been a huge problem for the industry over the past few years and its reputation has suffered massively as a result. The way some providers sold PPI to their customers has resulted in thousands of cases where consumers have been sold unsuitable products.
 
But he warned that the banks could pass on the cost to customers. ‘PPI policies have been an important revenue stream for the banks in the past and whilst it's great to see the industry held accountable for its mistakes, the fear is that British consumers will end up picking up the bill and we may see the end of free banking as providers seek to recover their losses through other channels,’ he added.

Andrew Hagger from Moneynet called on the banks to make sure that the repayment of premiums is made promptly and without fuss. ‘The PPI debacle has tarnished the reputation of our high street banks and has been a major contributor to the growing anti bank feeling over the last few years. It's time to draw a line under this sorry saga and for the banks to win back customer trust by concentrating on delivering consistently high levels of service and moving away from the pushy sales culture,’ he said.

Stefan Maryniak, personal finance expert at uSwitch, said there is a huge amount of trust to be rebuilt between banks and consumers. ‘Even though today's move is a step in the right direction, it could be too little too late. With all compensation cases now being looked at, we finally have a victory for consumers and common sense,’ he added.