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The Financial Services Authority (FSA) is currently being challenged in the High Court over mis-sold ppi compensation claims.  Banks in the uk said that the new rules of FSA are wrong simply because they’re retrospective.  The FSA demanded the banks to examine the previous sales of ppi which often can result in compensation worth ?2.7bn being paid to nearly 2.75 million people who were mis-sold ppi policies.

The spokesman of the British Bank Association (BBA) revealed that the FSA is attempting to impose new standards on the past sales.  The FSA rejected this allegation and noticed that these principles have been in place for a long time and are nothing new.

PPI policies were supposed to repay people’s loans if their income drops because of severe illness or lose their work.  However, this didn’t happen.  Most of the ppi policies were sold to individuals even though they were inappropriate for them which started the mis-sold-ppi issues.

A lot of banks and also other lending companies have been accused of mis-selling the product on a large scale generating many million of pounds in profit by offering this insurance policy that individuals are not aware they were paying for them.  In other cases, they were selling these policies to people even if the sales representative of banking industry and lending companies know that their customers won’t be able to claim.

In August 2010, the FSA laid down new rules for the banking industry and lending companies which started in force in December.  Their requirements in the past meant that banking companies and lending companies would have to review past ppi sales even where customers had so far not complained, potentially landing the banking and lending companies with a huge bill.

Customers should have to be paid back their mis-sold ppi premiums, plus interest, if the bank or other firm figured that the customers must have bought the policy in the first place.  If in case the customer paid with a single payment up-front, but would have bought a regular premium policy instead had it been offered, the customer would have to be put back in the position where they would have been taken it.

Our country’s banks, represented bt the BBA are now challenging the FSA’s new requirements.  The BBA has said the fact that past sale of ppi policies should be judged by the new guidelines in line with the FSA’s general principles, rather than on the specific rules applied at the time.  It disputes that a breach of FSA’s general principles does not actually give any customer the legal right to compensation with a specific complaint.

The spokesman also stated that the FSA is creating a precedent which usually permits it to apply recent rules to previous sales even if they were regulated by other sorts of FSA guidelines.