The judicial review seeks to challenge the watchdogs’ ban on lenders offering Payment Protection Insurance (PPI) at the point of sale of unsecured personal loans. The FSA believes that this is a practice which leads to mis-selling and customer exploitation.

The BBA group, which includes such high street giants as Barclays, HSBC, Lloyds and RBS, has demanded legal scrutiny of the move and of course hopes that the PPI ban will be struck down by the courts.

Writing for consumer website This Is Money, the Daily Mail personal finance editor Tony Hazell called the judicial review a “shameful action” and congratulated Santander for “standing out against the traditional banks in their latest bid to ride roughshod over consumers”. Mr Hazell said that the whole emphasis of the point of sale ban of PPI was to encourage fair treatment of people taking out unsecured personal loans, but that “the concept of fairness apparently has no meaning to those inhabiting the corridors of Lloyds, Barclays, HSBC and RBS, so they are demanding a legal definition”.

Santander, by exhibiting “the courage to stand out against this latest attempt to batter consumers”, was making a pledge to treat its customers fairly, which he welcomed.

This Is Money went on to advise anyone taking out unsecured personal loans to “avoid the rip-off” by seeking an individual PPI policy from an independent provider. It said that these could be up to 85 per cent cheaper than those offered by the high street banks.

The FOS published figures which showed that it dealt with 22,420 complaints regarding the group between 1 January and 30 June 2010, as opposed to a total of 21,569 complaints concerning Barclays (9,215), Royal Bank of Scotland (6.469) and Santander (5,885). Of the cases concerning the Lloyds Banking Group, 12,570 were related to Lloyds TSB Bank – 8,474 of these about general insurance policies.

Another 2,136 cases concerned Black Horse, Lloyds’ personal finance division, which sells products such as unsecured personal loans and car finance. The most common complaints about unsecured personal loans were problems to do with the sale of payment protection insurance (PPI).

PPI is meant to cover repayments on personal loans and other debts in the event of the borrower being made unemployed, suffering a serious injury or becoming unwell in the long term. However, many complaints have been made that some PPI policies do not pay out when needed.

For its part, Lloyds Banking Group stressed that the number of complaints received about it were low in relation to its large number of customers as Britain’s largest bank.

FOS chief executive and chief ombudsman Natalie Ceeney told Money Marketing magazine: “The complaints data shows there is still more that some businesses need to do to ensure that complaints are properly investigated and fairly resolved. The ombudsman is keen to continue to play its part and help businesses draw lessons from the complaints that we see, so disputes can be sorted out at the earliest opportunity.”

The company’s chief executive Jayne-Anne Gadhia told The Scotsman newspaper’s website that the new centre would create 200 new jobs at first and more as the centre expands. At the moment, Virgin Money’s head office is a small one with just 60 staff.

Ms Gadhia added that recruitment of staff would start next year, saying that Edinburgh is the best place in the UK “to set up a growing bank”.

“It is certainly good news for Edinburgh in terms of jobs. Given the town’s history in financial services, it is great to be able to make the most of that experience,” she went on.

Virgin Money grew out of the smaller bank Virgin Direct, that was established by Sir Richard Branson 15 years ago. With some three million customers across the UK, it offers credit cards, home and car insurance, plus a range of unsecured personal loans at competitive rates.

Under its expansion plans, the company eventually hopes to offer additional financial services. These would include mortgages, savings accounts and a suite of investment services.

Scottish Secretary Michael Moore applauded the move by Virgin, insisting that it was a “real sign of encouragement for Scotland’s economy”.

“We have become used to hearing bad employment news as a result of the recession, and the announcement of these jobs and the investment which goes with it is a real sign of encouragement for Scotland’s economy.”

The Financial Services Authority (FSA) said that it wanted to make sure that customers taking out various forms of credit and personal loans received fair treatment when making complaints. The FSA package is aimed at lenders and hopes to help them identify best practice and how to comply with it.

To that end, it will issue a new handbook setting out how to fairly handle complaints with full details of when and why lenders should examine their previous complaints.  The handbook will also help them weed out flawed sales practices.

The FSA called on lenders to prepare for the package’s introduction on 1 December by training staff and familiarising themselves with its contents. It warned that it will be keeping a beady eye on any lenders who fail to live up to the new standards when selling PPI with credit cards, finance deals and unsecured personal loans.

FSA director of conduct risk Dan Waters said: “We have worked hard with the industry to pull together a strong package of measures that we hope will allow the industry to draw a line under mistakes that have been made and help them to start selling PPI in a fairer way. Since we took over the regulation of PPI we’ve carried out 24 investigations and three thematic reviews, issued warnings, halted the selling of single premium PPI with unsecured personal loans, visited over 200 firms, and handed out some very significant fines. Now, with this package of measures we’re confident we can mend a market that has been broken for too long.”

The Competition Commission has plans to ban PPI at the point-of-sale for most credit cards, unsecured personal loans and other financial products. Growing concerns over mis-selling recently led the Financial Ombudsman to publish figures showing that more than 80 per cent of complaints had been resolved in favour of the customer.

However major credit-card providers still offering point-of-sale PPI include such major players as Egg, Tesco and Capital One, said Which?. PPI is supposed to cover a customer’s repayments on financial products such as credit cards and unsecured personal loans, in the event of the borrower falling seriously ill, suffering a serious accident, becoming unemployed or even dying.

However, some critics have complained that PPI is too expensive, with some insurers even refusing to pay out on policies when claims are made. At the end of last month, Lloyds Banking Group announced that it would immediately stop selling PPI with its personal loans, credit cards and mortgages, instead sending customers a generic leaflet about the insurance published by the British Bankers’ Association.

The decision by the Lloyds group also applied to all PPI sold by its numerous subsidiaries, such as Lloyds TSB, Halifax, Bank of Scotland, Cheltenham & Gloucester, and Black Horse. However, anyone who already had PPI policies with Lloyds, their mortgages, personal loans or credit cards will be unaffected and their policies will be honoured in the usual way.

The group placed secured loans – which are typically secured on a borrower’s property – in sixth place on a new top ten list of pointless and wasteful financial products, warning that the benefits of such a loan did not balance the risk of losing one’s home. Which? advised customers that such a product was “risky – only take out unsecured loans”.

At the top of the list was mobile phone insurance, which can cost up to £100 and was declared to be a waste of money, as “most people are already covered by their home insurance”. It was followed by extended warranties. Which? said that these could cost up to half the price of the product itself and were “too expensive to ever be worthwhile”.

The number three spot went to structured products – a kind of bank-backed investment package – which was said to be “confusing, complex and costly” compared to a more streamlined savings account, such as an ISA.

At number four was ID fraud cover, which offered protection already generally covered by a customer’s bank anyway. Payment Protection Insurance (PPI) was at number five, the sale of which alongside personal loans or credit cards is about to be banned by the regulator.

Which? Money Quarterly editor-in-chief James Daley commented: “Our research found that there is a bunch of financial products on the market that most people really don’t need. Don’t just follow what a salesman says – do your own research, speak to an independent financial adviser if you need expert help and make an informed decision about which financial products are right for you.”

At present, customers who take a complaint about a personal loan or other financial product to the lender company and had it rejected have six months to involve the Ombudsman. However, in the case of PPI complaints, the FSA said at the end of last week that any customer who has received a final response from a company between 28 November 2009 and 28 April 2010 now has until 27 October to complain to the Ombudsman.

Were it not for this exceptional ruling, the final day for people who received letters from their lender at the end of November last year would have been last Friday.

The extension has been granted as the watchdog continues to negotiate with lenders over proposals that they reopen previously rejected PPI cases. Some lenders have proven reluctant to do so, so the FSA has decided to take another five months to properly assess their responses, with a final decision due on 27 October.

A recent report by the Financial Ombudsman revealed that some 135 people a day complained to it about PPI in the last financial year and numbers are increasing. It said that during this time, a third of the 166,000 disputes that it resolved were regarding PPI.

The insurance product itself has come under the spotlight recently after the Competition Commission announced last month that it plans to ban PPI sales at “point-of-sale” – meaning that it can no longer be sold along with unsecured personal loans, credit cards and mortgages.