The High Court judgement will affect millions of bank customers Nearly three million people are awaiting a court ruling which could have a major impact on compensation for past loan insurance sales.
The Financial Services Authority (FSA) has been challenged by UK banks over retrospective compensation for the mis-selling of Payment Protection Insurance (PPI).
A judicial review was heard earlier in the year.
The High Court is expected to give its ruling on Wednesday.
PPI policies are supposed to repay people’s loans if their income drops because they fall ill or lose their jobs.
The banking industry has been accused of mis-selling them on a huge scale, generating many millions of pounds in profits by selling insurance that people were unaware they were paying for or did not need, or on which they could not claim.
The judicial review, which started at the end of January, refers to new FSA rules that require firms to review past sales, which could lead to compensation worth £2.7bn being paid to 2.75 million people.
The rules said that banks would have to review past PPI sales, even where customers had so far not complained, potentially landing the banking industry with the huge bill.
Customers would have to be repaid their PPI premiums, plus interest, if the bank or other firm concluded that the customer would not have bought the policy in the first place.
A similar reimbursement could be due to those customers that paid for a policy in full up front.
The UK’s banks, represented by the British Bankers’ Association (BBA), have challenged the FSA’s new requirements.
They argued that the FSA was effectively applying new rules to previous sales – even when those sales were regulated by other FSA rules.
One side effect of this dispute is that thousands of fresh complaints have been put on hold since last October, when the BBA first announced it would launch its legal action.
More than half of the 97,237 new complaints made to the Financial Ombudsman Service in the second half of 2010 were about PPI.
This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.