Judicial Review of the FCA’s PPI Complaints Rules

In March, the Financial Conduct Authority (“FCA“) released its Policy Statement PS 17/3 Payment Protection Insurance Complaints: Feedback on CP16/20 and Final Rules and Guidance. It concluded that as a result of the landmark Supreme Court decision in Plevin v Paragon Personal Finance Limited, failure to disclose commission in the sale of PPI gives rise to the presumption of an unfair relationship under s.140 of the Consumer Credit Act 1974. As a result, the FCA has introduced the concept of a “50% presumptive tipping point”, so that a firm should presume, when assessing a PPI complaint, that a failure to disclose commission of 50% or more would give rise to an unfair relationship under s.140.

The FCA has also introduced a 2 year deadline for consumers to make a claim to the Financial Ombudsman Service (“FOS“) in respect of mis-sold PPI of 29 August 2019. If a complaint (to FOS) is not brought by this date then a consumer’s right to do so will be lost.

The FCA’s Policy Statement has been criticised by many consumer representatives, on the basis that it is unfair to deny consumers the right to bring a claim where they may not yet even be aware that they have the right to claim. As a result, one claims management company, ‘We Fight Any Claim’ (“WFAC“), has now brought a legal challenge against the FCA. WFAC has applied to the High Court for a judicial review of the Policy Statement.

Judicial Review

The judicial review is on grounds that include: the 2 year deadline should not be imposed; the 50% presumed tipping point is unsuitable; and that redress should not be calculated as just the amount of excess commission over the 50% tipping point.

WFAC will need the Court’s permission for the judicial review to proceed. Should that permission be granted, a full court hearing will then be set where the arguments can be fully heard. It is important to note that the aim of a judicial review is not to review the merits of the FCA’s decision itself, but rather the way in which that decision has been made.

All bodies exercising functions of a public law nature are susceptible to challenge. A judicial review can determine whether a decision has been made illegally, irrationally, procedurally improperly or in breach of a legitimate expectation (either procedural or substantive).

Once permission has been granted, if it is considered that the decision has been made in one of these ways, then a Judge has the discretion whether or not to grant a remedy. Some of the remedies available are an order quashing the decision in question, an order restricting the body from acting beyond its powers, a declaration or an injunction. More than one remedy can be granted by a Judge if appropriate to do so.

Given that the Policy Statement is due to take effect on 29 August 2017, it is clear that this challenge will need to be dealt with swiftly. Otherwise it runs the risk that an advertising campaign spearheaded by the FCA will be to no effect, should the Court allow the judicial review and determine that the Policy Statement has been made unlawfully.