The Financial Services Authority (the FSA) has recently issued a statement on the status and implications of the open letter it sent to the insurance industry in August 2010 setting out common point of sale failings for PPI sales.

Please click here to review an earlier blog on the FSA’s PPI reforms, including the open letter.

The statement is in response to the British Bankers’ Association’s (the BBA) legal challenge to the FSA’s PPI provisions during which the FSA became aware that its open letter may have been misinterpreted.

The FSA’s open letter refers to new handbook provisions that contain a non-exhaustive list of common failings at the point of sale that have resulted in poor outcomes for consumers in relation to PPI.

It is the FSA’s understanding that the BBA interprets the open letter as meaning that the FSA considers that a sale, in which any one or more of the common failings occurred, would necessarily involve a breach of the FSA’s Principles for Business, or other rules or the general law, without there being a need to consider all of the relevant circumstances of the particular sale in which the common failing featured.

The FSA’s statement clarifies that this is not its position. The FSA states that the list of common failings is intended to help firms to comply with their obligations when selling PPI and to give fair consideration to consumer complaints. However, it is not a substitute for a full assessment of the sale in light of all the available information when determining whether or not a firm has breached FSA rules.

The FSA’s statement can be found here – FSA statement regarding Payment Protection Insurance (PPI).