Payment Protection Insurance - Barclays Challenge Government ruling
Barclays scupper plans for PPI reform
Plans to restrict the sale of payment protection insurance (PPI) at the point when loans or mortgage are granted have been set back following a successful appeal by Barclays bank. The Competition Appeal Tribunal has now been forced to instruct the Competition Commission to back down from its plan to ban PPI sales such as mortgage protection insurance, at this point of the transaction. The Commission released a statement commenting that it would study the judgement closely before deciding what course of action it would take next. In a carefully worded statement however it was made clear that it was only this one small part of their strategy, to make choices clearer for consumers, that was being affected.
A spokesman for the commission commented "The appeal was upheld on one ground which relates to our assessment of the remedy prohibiting the sale of PPI at the point of sale of credit,” before adding that it was because The Commission had been asked to “reconsider the loss of convenience for consumers of not being able to buy PPI at the same time as taking out credit."
Intended to allow consumers a cushion for repayment of their credit cards, loans or mortgages should they fall ill or lose their job, PPI has been a bone of contention between insurance companies and banks and finance companies for some considerable time. Early this year the Commission outlined a range of limitations on the sale of PPI with some commentators claiming the lack of competition in the field has led to “persistently high prices”. The Commission had stated that from October 2010, lenders would be unable to initiate a sale of a policy for up to 7 days after granting a loan to combat the “point of sale” advantage that the lenders had gained.
However after challenging the Commission’s plan on four separate grounds – three of which related directly to the point of sale restriction, Barclays have successfully convinced a tribunal that putting this plan into place could put customers who actually wanted to purchase cover at a disadvantage.
Referring to the plans laid out by the commission as a “remedy without consent” the Tribunal concluded that the Commission had failed to take into account the “loss of convenience which would flow from the imposition of the point of sale prohibition”. The Tribunal also added that it was this “constituted failure to take into account a relevant consideration” that meant that the Commission would need to revise its plans once more.
However the overhaul of how PPI sales are regulated is still continuing at a rapid pace as complaints from consumer organisations and those who believe they have been mis-sold PPI grow exponentially. This year alone we have already seen the FSA tell banks and other financial institutions to compensate those who may have been mis-sold policies, re-open the 185,000 old complaints that have been dismissed, and stop selling the much criticised single premium PPI, whilst companies offering help and advice to claim back fees spent on mis-sold PPI has practically become an industry in itself.
Referred to as a “protection racket” in some corners of the industry due to abnormally high cost policies being sold to people who can’t actually make a valid claim under the terms of their agreements PPI providers added excess profits of £1.4bn to their coffers in the heady days of 2006 when the Competition Commission first began making enquiries into the sector.
As Martin Lewis of financial advice website moneysaingexpert.com succinctly commented “Bank-based PPI is a near con - it's hideously over-expensive, billions of pounds of it have been mis-sold, and the sooner it's cleaned up and cleared out the better.”
At a time when public faith in the entire banking sector is at an all time low how the public will react to this further delay in cleaning up what is a tainted section of both the banking and insurance worlds’ remains to be seen. However, the general consensus amongst financial commentators is again echoed in Mr Lewis’ comments "It's a shame Barclays has succeeded in using its lawyers to delay the implementation of such an important ruling"
Whether they have stemmed the tide for good, or as Mr Lewis suggests have simply delayed the inevitable is uncertain, but for the time being the Bank’s are refusing to let this go without a fight.
Kris Oldland
------------------------------------------------------------------------------ WARNING DO NOT BUY PPI FROM A BANK - EVER!
Insuranceblogger urges consumers to shop around and buy mortgage protection insurance from independent suppliers after they have researched the market. The point of removing PPI sales from mortgage and loan sales was to stop the consumer from being pressurised into buying overpriced products to secure the loan.
Once again a bank, admittedly not one overly involved in the toxic debt fiasco , but one intricately involved in the collapse of the banking system by it's failure to step in and rescue Lehman Bros. (until they had collapsed and they cherry picked the best bits!), is allowed to dictate to Parliament and interfere with the due process of consumer law! Insuranceblogger recommends checking out alternative protection products such as Lifestyle Income Protection Insurance which has wider covers and is not tied to any particular lump sum debt.
FSA orders GBP 60 Million Mortgage Protection Insurance Repayments
More than a million UK householders are to get refunds on their recent mortgage protection insurance monthly payments, after the City watchdog, the FSA, forced PPI providers including giant firms such as Aviva and Abbey; to pay back over GBP60 million in increased Mortgage Protection Insurance premiums, which were slapped on already cash strapped mortgage borrowers earlier this year. Over 2.1 million UK consumers have policies to repay mortgages and loans with accident, sickness and unemployment insurance attached.
The major UK money lenders have had over 10 years of collecting premiums on inflated house prices, with very few claims. But with claims now rising due to the recession, they've been recently hiking up the rates on many of these policies to maintain their profit levels.
The Financial Services Authority (FSA) and Mortgage Payment Protection Insurance (MPPI) firms have agreed an industry-wide package of measures for consumers, including refunds of around £60 million.
The industry has acted in response to FSA concerns over recent increases in premiums and reductions in what customers are covered for under their policy. The FSA’s concerns centred on the terms permitting these changes, and how clearly they were disclosed. The FSA expects its concerns to be addressed by the agreement reached. Following discussions initiated by the FSA with relevant trade bodies and some firms, the industry has responded positively by agreeing to:
• proactively refund increases in premiums, and reverse any reductions in cover, for customers who have experienced these changes to their policy in 2009; • offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009; • freeze premiums and cover for existing customers for at least the remainder of this year • amend Mortgage Protection Insurance contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.
New contracts will mean customers get a fairer deal with two months' notice of any changes to enable people to compare mortgage protection insurance products and switch mortgage protection if necessary.
Jon Pain, managing director of supervision at the FSA, said:
"The FSA welcomes this positive move by Mortgage Protection Insurance firms to reverse recent changes in premiums or cover which will put affected customers back in the position they were in before the policy was changed. It will also give all MPPI customers clarity about when and why firms will be able to vary these in future. "This clarity will provide the basis for MPPI to remain a valuable option for many mortgage customers who wish to take out protection, alongside the mortgage commitment they are taking on." The affected companies will contact customers if their policy is affected, and will make all refunds by the end of June 2010.
The Consumer Panel has also welcomed the announcement today of FSA action and an industry-wide refund on Mortgage Protection Insurance. Adam Phillips, Chairman of the Financial Services Consumer Panel, said: “This is exactly what a financial regulator should be here for and we applaud the FSA’s action. It cannot be right that firms change the terms and conditions of an insurance policy just as times get hard and when people are more likely to try to claim on it. We note that this agreement is to freeze premiums and cover for existing customers until at least January 2010. We will be watching to see how the FSA ensures Mortgage Protection customers continue to get a fair deal beyond this date. Significant changes to cover go against the whole principle of why people pay for insurance and undermine consumers’ trust in the industry.”
Burgesses Insurance News has published an interesting article today looking at the rationale behind the purchasing of insurance as a protection vehicle, and questions why the public are disinterested and can't be bothered when it comes to purchasing Mortgage Protection for the largest investment of all - a house!...........
It it just that the public doesn't appreciate the risks? Until it is too late....
Mortgage insurance – why be vulnerable?
First Published Burgesses.com July 27th, 2009 in Mortgage Insurance |
Most people are thoroughly accustomed to one of the most basic principles of insurance – if something is valuable, it is probably worth insuring. Although the principle might be widely recognised in many other areas of domestic life, however, for some reason it does not seem to be so readily grasped when it comes to mortgage insurance.
Only an estimated 25% of the nation’s 11.7 million mortgage borrowers are believed to have arranged this potentially indispensable for of insurance. Given the sheer value of the mortgaged homes, not to mention the dire consequences of defaulting on the mortgage repayments, the statistic is surprising to say the least. Some three-quarters of borrowers seem to be leaving themselves vulnerable to the most common risks to their incomes – accidents, illnesses and unemployment – and with the loss of an income, the ability to continue their mortgage repayments.
The penalties for defaulting on the mortgage repayments, of course, can be serious indeed. In the worst cases, it can lead to repossession of the home itself by a mortgage lender determined to recover the outstanding debt. But even if some arrangement can be reached with the lender, the homeowner is still vulnerable. If mortgage repayments cannot be made, the home might have to be sold – even though the current state of the housing market might mean that such a sale realises less than the outstanding mortgage debt. At the very least, the late or non-payment of the mortgage instalments as they fall due will attract adverse credit reports on the borrower’s file. This will make borrowing – or any other form of credit – more expensive to arrange in the future, if the facility is extended to the individual at all.
This is a vulnerability that the homeowner can easily avoid with mortgage insurance. The insurance can offer complete protection for the mortgage repayments in the event that the policy holder meets with an accident or suffers an illness that prevents normal earnings from work. The same protection is also extended if the policy holder loses his or her job through compulsory redundancy. In any of these events, such a policy will pay out an insured benefit from which the mortgage repayments can continue to be paid – in many instances, directly to the mortgage lender concerned, if needs be.
Once in payment, the mortgage insurance monthly benefit payments ensure that the mortgage is repaid every month that the policy holder remains incapacitated for work, involuntarily unemployed, or for up to a typical maximum period of 12 months, whichever is the shorter time. Taking up the option offered by some policies, payouts can be made over an even longer period and extended for up to a maximum of 24 months, if an additional premium is paid.
Mis-Sold Payment Protection Insurance? Claim It Back Now!
Have You Been Mis-Sold Payment Protection Insurance?
If you took out a loan, mortgage or credit card from a bank or building society in the UK the chances are that you were mis-sold payment protection insurance or PPI as it is often known. The law has now changed and it is possible to reclaim all your payments in full plus in some cases, damages, usually at no cost to yourself through a so called no win no fee agreement..
The types of policies that were mis-sold were mortgage protection, loan payment protection insurance, Credit card insurance and in some cases and income protection. Whether you qualify to claim depends very much upon when you were mis-sold the policy. The new law only covers payment protection insurance policies sold after January 2005. However, many lawyers will pursue on you behalf policies sold before the cut off date, and in many cases recover your payments. there are numerous no-win no-fee law firms starting up to pursue these errant banks and lenders through the UK courts in what has become a multi-billion dollar business.
The good news for the claimant is that these law firms handle everything for you and the only contribution you have to make is confirming the mis-selling took place and banking the check.
You are eligible to claim through the UK courts against a lender who mis-sold you payment protection insurance if you can satisfy any one of the following 13 conditions.
1. The PPI was added without your express agreement or knowledge.
2. The sales staff or person selling the mortgage or loan insurance was coercive, pushy and strongly advised you to take out the PPI cover.
3. You were told you had to take the payment insurance.
4. You were told you could not get the mortgage without MPPI.
5. You were told you could not get the loan without loan payment protection insurance.
6. The cover you were offered was included in the loan or mortgage
7. You knew you were soon to be unemployed.
8. You were self-employed when the payment protection was sold to you.
9. You were retired or over the age limit for PPi cover which is usually 65.
10. You were not asked about any pre-existing medical conditions that you may have suffered from.
11. You were not told that pre-existing medical conditions could affect your insurance cover.
12. You were not informed that the UK's two largest problems for time of work, namely stress and back problems were excluded from the insurance/ or you informed the lenders staff about your medical condition but was not warned that this would affect the protection insurance cover in the event of a claim.
13. You were not asked if you already had any existing mortgage protection or loan insurance in place elsewhere or employer benefits that would cover my repayments.
If any of the above instances apply to you , you have probably been mis-sold payment protection cover and need to contact a solicitor or specialist lawyer who will claim on your behalf. Act now as there may well be additional time limitations put in place as the number of claims rises.
For the latest news of the cheapest payment protection insurance available from independent UK suppliers visit the Payment Protection Insurance News website run by specialist provider Burgesses.com.
What a bunch of Bankers! UK Banks challenge PPI ruling
Feelings are running high this morning in the Payment Protection Market and the consumer pressure groups with news that Barclays and Lloyds TSB are challenging the Competition Commission's ruling to ban the sale of Payment Protection Insurance at the time of sale of a loan mortgage or credit.
Insurance Blogger thinks this is outrageous after years of expenditure on the investigations by the FSA and Competition Commission and others, and the subsequent fines for misselling, that any institution, let alone a largely Government owned institution Lloyds Bank, should have the right to challenge any such decision!
Payment protection insurance lobbyist Sara-Ann Burgess from specialist payment protection insurance company, Burgesses confirms our viewpoint. She said "These institutions are without morals and intent on putting profit ahead of consumers' interests." "This latest move is a bid by the banks to continue making billions of pounds in profits in order to prop up other failing business areas. "We all know PPI mis-selling is rife amongst High Street lenders and their resultant profits are obscene. These delaying tactics, lodged to stop the ban going ahead in October 2010, only serve to prove just how shameless these firms are and the extent they will go to protect their 'cash cows'."
The UK Protection Insurance sector takes over £5 billion in premiums every year and around 90% of the premiums goes in profit to Banks and Building Societies.
In 2006, the Competition Commission reported the 12 largest distributors made profits of GBP1.4bn - before the recession kicked in and demand for unemployment insurance protection and income protection insurance policies grew.
After a lengthy investigation into anti-competitive practices, the Commission announced in January a series of measures to lower prices and widen choice in the PPI sector.
These included: axing single premium PPI and replacing with monthly payments. a seven day ban on selling cover alongside credit. a requirement to offer PPI separately to credit.
The Financial Ombudsman Service predicted some 30,000 payment protection insurance mis-selling complaints would be received by the end of March this year and confirmed the majority of them can be traced back to High Street lenders.
It upholds at least 90% of cases and in the case of one lender, 100%.
Sara-Ann Burgess concludes: "How can you on the one hand say banks are working to restore confidence and then on the other have two major players challenging decisions in order to maintain gigantic market shares and prevent freedom of choice? Actions are certainly speaking louder than words. These lenders are damaging the financial well-being of consumers and will continue to do so. What's equally insulting is the fact that Lloyds is paid for by taxpayers and our money is being used to ensure we continue to be ripped off."
Insurance Blogger couldn't agree more! The banks created the current recession by the misselling of mortgages and piggybacked missold mortgage payment protection insurance, and now they are trying to retain their ill gotten share of a market that wouldn't exist if they had done their job properly in the first place.
BancAssurance is a French joke - Keep your noses out of Insurance - Bankers!
For those of you still in a job, we wholeheartedly recommend Burgesses Unemployment Insurance
Mortgage Payment Protection Insurance? For Quality Think British
Simon Burgess the CEO of BritishInsurance.com the UK's largest and most popular independent mortgage payment protection insurance company offers some frank and sound advice on purchasing mortgage payment protection insurance.
BritishInsurance.com has won multiple awards from trade press and consumer groups for its MPPI products, over the last three years.
UK Finance Giants withdraw Unemployment Mortgage Protection Insurance for own employees
Insurers may withdraw Mortgage Protection Insurance cover to their own employees
In the wake of the credit crunch, collapse of Lehman Bros. , the inevitable threat hanging over the future of Amercian insurance giant AIG, and the unprecedented collapse of UK Insurance giant HBOS shares by 40% in one day, you could argue that MPPI unemployment Insurers are right to worry and already some capital lenders are refusing to offer payment protection insurance to homeowners and employees who work for banks and building societies. Some Underwriters have gone further becoming more risk averse and have included all financial services sector workers including insurance company employees, IFAS and insurance broker staff. This adds to the growing list of trades and professions who are now finding it increasingly difficult to puchase unemployment insurance to protect their mortgages, income level or loans.
Construction workers, estate agents, conveyancing solicitors and services and more recently removal firm staff can no longer easily purchase mortgage payment protection insurance or the other products that could ease the pain of being unemployed.
The move could be indicative that the UK Insurance market is heading for recession. Insurance Staff have been made unemployed gradually over the the last six months, with a recent 6000 redundancies at Norwich Union flying under the general radar, with other insurance company giants creating redundancy hitlists.
A spokesperson for Personal Accident - one of the UK's largest online independent mortgage protection insurance providers, who compare policies on price and cover - said, "It's true that we have received notices from some of our underwriters withdrawing certain particular income related unemployment cover for a list of trades within the financial services sector. However we can still offer age-related policies for income protection insurance and mortgage protection insurance to all bank and building society staff, which generally offer better cover at lower prices as they are not lifestyle rated and available to anyone. As these are monthly policies they are simple to change midstream - you could save yourself a fortune in premiums if you switch your policy from a bank or building society and a lot of worry if you are unfortunate and join the ranks of the mass unemployed, or your building society or bank collapses leaving your policy worthless. Could you meet your mortgage repayments or pay bills without a job? These are very worrying times...."
Simon Burgess head of independent provider Burgesses agreed. "Age-related unemploment insurance offers the best solution to financial services workers who may be threatened with unemployment. We offer policies to cover your mortgage, wages or debts whilst you are unemployed. I would however advise anyone thinking of protecting themselves from financial harm if they lose their job, to act fast as there is a ninety day exclusion no claims period from the start of the policy." He added, "Although our mortgage protection insurance has seen a downturn with the number of new mortgages being taken out virtually non-existant due to the credit crunch, we have recently seen a sharp rise in the number of unemployment insurance applications, particularly from workers in financial services."
So it appears that if you want to be able to pay your mortgage in three months time or still have an income you should take out payment protection insurance cover today. This is particularly prudent for financial services sector workers whose jobs appear to be most at risk.
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