Due to the thousands of complaints it received from the public about the mis-selling of PPI (Payment Protection Insurance), the Financial Services Authority (FSA) has for three years been investigating the way that PPI is sold. Last Year the FSA announced that it would undertake a further and far more extensive investigation into the PPI selling methods, particularly to test whether:
1. When borrowing money, customers are told that PPI is optional.
2. Customers are given clear information about the PPI product and its cost.
3. Customers are given the assistance they need by the Lenders to be clear about what they are eligible for under
the policy and what the exclusions are that will affect a claim.
4. When advice is given to a customer the advice should only recommended a policy that meets their individual needs. This includes sales material where PPI products and services marketed and sold in the UK are designed to meet the needs of the consumer.
5. All customers should be offered a fair refund if they cancel their policy. Customers do not face unreasonable post-sale barriers imposed by firms to change product or switch to an independent PPI provider, submit a claim or make a complaint about the policy.
This year the FSA both outwardly and as part of a commissioned mystery shopper exercise visited 150 sellers of Loan Payment Protection Insurance, the PPI product that had received the most number of complaints, who sell LPPI alongside their unsecured personal loan offerings.
The FSA investigation found that:
1. There have been improvements in two of the outcomes above, namely in making it
clear that PPI is optional and providing refunds on virtually all single-premium
policies, but little or no improvement in the remaining three, including the disclosure of price and policy details as well as firms’ consideration of eligibility and suitability.
2. Around two thirds of firms visited and nearly all of the firms mystery shopped failed to meet the ICOB requirements.
3.Around 30 percent of firms visited and less than 50 percent of firms mystery shopped failed to insure that customers are given the basic information necessary to make an informed decision about this product; and many PPI products do not appear to be designed to meet the needs of the customers to whom they are sold.
The FSA have stated that they believe that customers would generally benefit from a more flexible Loan payment protection product that can be tailored to meet their needs and is targeted accordingly, and that they expect firms to take active steps to ensure they are meeting the three investigation outcomes identified as problem areas.
If you are lucky enough to get a loan in the current economic climate, do not take out the PPI that a lender is offering, because it will cost you at least four times the premium than that offered by independent companies such as British Insurance or Personal Accident. It pays to shop around and you’ll probably be offered better cover with less exclusions, so the only worry you’ll have is how to pay off your loan