Customers are still being mis-sold payment protection insurance while the FSA ‘dithers’ over appropriate regulation of the controversial industry.
The FSA has said that it is stepping up its investigation into the PPI selling process, but meanwhile, thousands of UK consumers could be wasting hundreds or thousands of pounds in loan insurance payments and huge amounts of interest when it is added onto the cost of their loan.
Consumer watchdog Which? has criticised the FSA for taking so long to determine what action should be taken on companies that sell PPI to customers unfairly – i.e. by not disclosing to them all that it entails.
Among the reasons that constitute a PPI policy being mis-sold are not telling the customer that the amount is being added onto their loan and that it will therefore incur interest; in its investigation, the FSA found that only half of customers were told about the key limitations and exclusions of the policy, and many were not informed of the total monthly amount they would pay, including PPI in addition to the loan repayments.
Jon Pain, managing director of the FSA’s Retail Markets, said that “Tackling poor PPI sales practices remains a high priority for the FSA. We will intervene to ensure consumers are protected and are considering what regulatory powers are the most appropriate to deliver fair outcomes.”
But Which? believes that the FSA could be doing more. Which? chief executive, Peter Vicary-Smith criticised the Financial Services Authorities’ efforts thus far, accusing it of emitting a “weak response” to the issue, and doing little to “help the millions of people who may have been mis-sold policies or to improve sales practices.”
Which? has written to the FSA, calling on the regulator to take more affirmative action on the industry. The watchdog wants to see companies who sell PPI ringing up their customers and telling them about the problems in the market, explaining what constitutes a ‘mis-sold payment protection insurance’ policy, and giving advice on how to make a payment protection claim if the customer thinks that they have been mis-sold one.
One couple, used by Which? as an example to demonstrate the problems in the PPI market, paid out almost half the amount borrowed in PPI – £22,568 for a £56,000 loan.
Doug Taylor, Which? personal finance campaigns manager, thinks that “Slapping firms on the wrist with large fines is a start but doesn’t go far enough. The fact that firms are still being fined for PPI failings shows that the problem won’t go away on its own and PPI’s relatively low profile means the number of complaints doesn’t necessarily reflect the number of mis-sold policies.”
