The Week Unzipped: Banks go to court to defy regulators over mis-selling of credit insurance

BRITAIN'S banks have picked a new fight with financial regulators in the hope of avoiding multi-million pound compensation claims following the mis-selling of credit insurance.

The British Bankers' Association announced on Friday that it was going to court to block new rules on the way compensation must be paid due to come into force in December.

It will ask the court to judicially review guidelines laid down by the Financial Services Authority (FSA).

However, the FSA immediately announced it will contest the bankers' action, and advised institutions to continue handling complaints as they have been ordered. The Financial Services Ombudsman, which can adjudicate disputes unresolved by the banks, said it would continue operating as normal.

Credit insurance, to protect against sickness or unemployment, is believed to have been widely mis-sold, via hidden charges on credit cards, personal loans and other debt.

Peter Vicary-Smith, chief executive of Which?, said: "The BBA's taxpayer-backed members should take a long, hard look at themselves and ask why they continue to wage this ridiculous war on consumers."

Elsewhere, it has emerged that more than half of all current accounts no longer pay interest, according to Moneyfacts.co.uk.

Current account customers typically receive just 0.77 per cent interest compared with an average rate of 1.43 per cent five years ago. A total of 55 per cent of current accounts pay zero interest to customers who are in credit. A further 28 per cent pay 0.1 per cent or less.

Rate stays at record low

THE Bank of England held UK interest rates at the record low of 0.5 per cent for the 19th consecutive month.

The bank also voted to hold the 200 billion quantitative easing programme at its current amount. Rates have remained fixed since March 2009.

Cut in tracker rate

BARCLAYS has cut its lifetime tracker mortgages by up to 0.41 per cent to celebrate mortgage lending hitting 100 billion. The new rates start at Bank of England base rate (currently 0.5 per cent) plus 2.08 per cent, giving a pay rate of 2.58 per cent, on life time tracker mortgages with a 30 per cent deposit and a 999 fee.

HSBC cut rates on all its 80 per cent loan-to-value mortgages by 0.4 per cent. All the products, which require only a 20 per cent deposit, have booking fees at 399 or less. The bank also introduced a two-year discounted mortgage at 2.79 per cent with a 99 fee.

Lloyds TSB Scotland launched its lowest ever three-year fixed-rate mortgage at 3.99 per cent. The product is available to first-time buyers, house purchasers and remortgagers with a 30 per cent deposit. The deal charges an 895 fee.

Scots saving less

SCOTS are losing the savings habit, according to a study from NS&I's Savings Survey which shows savers are struggling harder than ever to put a bit by. We have gone from being the best, to below average savers for the UK as a whole. Over the past three months, savers have stashed away just 93.85 monthly, or 6.7 per cent of monthly income, compared with 7.28 per cent this time last year.