As reported in today’s Times, ACC member company We Fight Any Claim has forced the Financial Ombudsman Service to re-consider the case of a customer in relation to his PPI claim on a credit card.

This action may have wider implications for all credit card rejected claims, and may lead to further provisions being needing to be set-aside.

The story states:

The financial ombudsman has been forced to look again at the case of a man who complained that he had been mis-sold payment protection insurance, in what could open the floodgates to thousands more claims.

William Edmunds had an initial complaint about PPI on his MBNA credit card rejected by the ombudsman, but legal action by a claims company acting for Mr Edmunds has forced the ombudsman to reconsider his case.

That could lead to many more rejected cases being reopened, according to We Fight Any Claim.

At least £85 million of redress could be paid to 50,000 people who have been rejected, the claims manager has estimated. Many new claimants may also come forward, it believes.

The financial ombudsman, which aims to provide independent adjudication on disputes between consumers and banks and other financial companies, has approved more than 60 per cent of the PPI complaints that have come before it in recent years, ranging from mortgage loans to credit cards. That rate is too low, according to consumer groups and other critics, given the scale of mis-selling of PPI by financial companies over the past three decades and the way in which many policies were structured.

PPI was meant to cover loan repayments in the event of loss of income, but exclusions for common ailments such as back pain and mental illness were widespread, while the cost of the policy frequently was not explained.

A spokesman for We Fight Any Claim said: “PPI was so financially toxic that if the regulatory rules are properly applied complainants should almost always be redressed. If a restaurant sold food with E. coli in it, you wouldn’t be surprised if all the customers got their money back.” We Fight Any Claim, which makes its money from fees on successful PPI complaints, has targeted its legal action against the Financial Ombudsman Service over credit cards, where the cost of PPI has been much higher than on loans.

The Wales-based company has calculated that a balance on a typical credit card with PPI could escalate from £1,000 to £3,000 in ten years if the user made only minimum payments to keep the spending balance at £1,000. The additional £2,000 could be racked up in PPI costs and compound interest.

We Fight Any Claim started a judicial review of the ombudsman based on Mr Edmunds’ case, the only one where the service has given a formal adjudication. It has accused the body of “stockpiling” 5,000 more cases before the final stage to avoid being legally challenged over them.

A spokeswoman for the Financial Ombudsman Service said: “We make decisions based on what is fair and reasonable, taking account of relevant factors including law and regulations as well as good industry practice. Individual cases are decided on their own facts.”

In Mr Edmunds’ case, the Financial Ombudsman Service went through issues such as whether it was clear that the PPI cover was optional and whether the policy was affordable. The conclusion was that the policy did not breach any rules. Many of the cases awaiting a final adjudication brought to the ombudsman by We Fight Any Claim are over MBNA and Capital One and store cards issued by Genworth, now owned by Axa, the insurer.

Simon Evans, Chief Executive of the ACC commented:

“Once again we are seeing our member companies taking on the system that is continuing to lead to consumer detriment.

“We are committed to striving for the best outcome for consumers in these financial mis-selling scandals, and we will continue to expose issues that arise in the systems that are in place to compensate consumers, as we believe there are still flaws and mistakes being made.

“This isn’t good enough, and is further evidence of the need to oppose a time bar for PPI complaints.”