Lenders curb sales of payment protection insurance

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Some of the biggest high-street banks in Britain have stopped selling single premium PPI, ahead of an expected curb on its sale by the Competition Commission.

Despite warnings that it could result in more expensive loans, the Commission is expected to outlaw the sale of single premium policies when it announces its final proposals to clean up PPI sales in the next couple of weeks.

Pre-empting a ban, Alliance & Leicester, Barclays, The Co-operative Bank, Lloyds Banking Group, which includes Lloyds TSB, Halifax and Bank of Scotland, and RBS/Natwest have announced that they will stop selling single premium PPI with unsecured personal loans by the end of this month.

The move was welcomed by Jon Pain, managing director of retail markets at the Financial Services Authority, the City regulator. He said: “We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement as long as the policy is sold appropriately.”

PPI policies cover debt repayments if a borrower cannot work because of accident, sickness or unemployment, but they have been widely mis-sold. The Competition Commission said that sales standards are particularly low for single premium policies, where consumers pay for the insurance upfront. The cost of the PPI is usually added to the loan and interest charged on this amount, significantly increasing the cost.

The Commission recommended a ban on single premium plans in an interim report published in November, where it also suggested that lenders be prevented from contacting a customer about the insurance within 14 days of a credit agreement being signed and called for advertising to be made clearer.

Lenders have warned that the proposed crackdown would force them to push up rates on loans because they would no longer be able to subsidise deals with profits earned from the insurance. Payment protection has been one of the biggest moneyspinners for banks such as Lloyds, Barclays and Alliance & Leicester, worth an estimated £3.5 billion. A huge slice of the profit is expected to be lost if the whole package of measures are approved.

Stephen Sklaroff, director-general of the Finance and Leasing Association, which represents lenders that sell the insurance, said: “Significantly fewer policies will be sold. That will inevitably have an effect on loan rates, possibly pushing up rates by several percentage points.”

But Louise Hanson, head of campaigns at Which?, the consumer group, said that PPI sellers know that they are facing a losing battle.

She said: “These firms have recognised that the party is over for single premium PPI and the rest should follow suit. People need to protect their finances more than ever so providers should be developing products that meet consumers’ needs and offer value for money. PPI has been widely mis-sold in the past so anyone with a personal loan should check if they have a single premium policy as they could claim their money back.”

Which? is using social networking site Facebook to encourage people who think they may have been mis-sold the cover to reclaim their money. It has launched Payback, an application designed to spread awareness of PPI among recent graduates and young professionals who may have been mis-sold a policy when taking out an unsecured loan or credit card.

Peter Jackson, managing director of Lloyds Banking Group, Consumer Banking, said that its decision to stop single premium sales was in direct response to customer research.

He said: “Lloyds TSB customers told us they valued the cover PPI provides but, as the economy moved into uncertain times, now wanted a more flexible product which would make it easier for them to manage their budgets.

“Halifax and Bank of Scotland have also taken the decision to launch a monthly premium payment protection insurance policy. This has been in development over the last few months and will be launched early February 2009.”

The FSA has taken action against 20 firms over poor sales practices involving PPI, including levying its largest ever fine in the retail sector when Alliance & Leicester was ordered to pay £7 million for what the regulatory described as “serious failings” in its telephone PPI sales.

Number of mis-sold PPI claims double each month

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According to an article on the Financial Times websites, the number of cases for mis-sold PPI (Payment Protection Insurance) are dramatically on the increase, with almost all claims being upheld. It has become clear that millions of policies have been mis-sold to unsuspecting customers over the years.

Overall, PPI mis-selling complaints had doubled every month for the last six months, backing up recent statistics from the Financial Ombudsman Service (FOS) that PPI claims through the FOS have trebled in the last year. Of those complaints, the FOS upheld 89 per cent in favour of the consumer.

As a result, we are urging people who have taken out loans, mortgages and credit cards in the last six years to check whether they have payment protection insurance, because the chances are it was mis-sold. If you have make sure to contact us and we will help you claim your money back!

One of the main problems at the moment is that many people do not even know they were sold PPI. In the past it was simply added to the loan. In many cases the whole of the amount of the insurance was added to the amount of the loan so that even if the loan was paid off early, you still have to bear the total cost of the payment protection insurance and not just what you’ve used.

Check all your loans, credit cards and mortgage documents from the last six years NOW to make sure you weren’t sold something you weren’t aware of.

This has been one of the biggest financial cons in the history of the industry.

Don’t let them get away with it! Reclaim Your Money NOW!

PPI still mis-sold, says Which?

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Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.

A survey for the consumers’ association suggests that nearly 10 million people have a PPI policy with their cards. But 13% – 1.3 million – bought it under the mistaken belief it was compulsory or would improve their chances of having their card application approved.

Which? said people were wasting their money buying any form of PPI policy.

“Credit card PPI is a modern day snake oil – it’s a useless product, expensive and poorly designed,” said Doug Taylor of Which?

“In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole,” he added.

This was rejected by the British Bankers Association (BBA), who said the insurance was a valuable “plan B”.

“Taking out PPI is not a condition for agreeing to provide the borrowing facility and people are free to shop around if they want to,” a BBA spokesperson said.

“Last year, a mystery shopping exercise carried out by the FSA showed improvements in staff making it clear to customers that cover is optional and new rules which came into force in July tighten the PPI regime even further,” the spokesperson added.

PPI is designed to ensure that people can still repay their loans, such as credit card payments or mortgages, if they fall ill or become unemployed.

Criticism

Consumer bodies such as Which? and Citizens Advice have long campaigned against the selling of PPI, describing it as little more than a protection racket run by the banks to boost their profits. In June this year the Competition Commission calculated that customers were being overcharged for the insurance policies each year because of a lack of competition at the point of sale.

Meanwhile the main financial regulator, the Financial Services Authority (FSA), has fined 11 financial organisations in the past two years for mis-selling the insurance.

The most high-profile example was that of the Liverpool Victoria friendly society – now called LV – which was fined £840,000 earlier this year. Its staff had tagged on the cost of PPI insurance to the quotes it gave to 14,500 customers who had asked for personal loans – but without telling them it was doing this.

The Office of Fair Trading (OFT) has also criticised PPI policies for frequently exaggerating the level of cover on offer.

Survey

Despite the barrage of bad publicity over the past few years, and the increased regulatory scrutiny, PPI polices are still widely sold. Cover for credit cards repayments is the second most common form of PPI. Which?’s survey of 2000 adults in the UK found that 32% of those with credit cards had also bought a PPI policy as well. Of those, 13% said they believed that taking the cover was a condition of being given the card, or that their card application was more likely to succeed if they did so.