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More exposure of the PPI scams.
Will the FSA now take action?
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Julian Knight: 'Mis-selling' is the word – be bold enough to use it
Published: 30 September 2007
http://money.independent.co.uk/perso...cle3013026.ece
It was déjà vu last Wednesday when the Financial Services Authority (FSA) released its findings from a "mystery shop" of payment protection insurance providers. PPI is designed to meet the loan if you can't repay it due, say, to injury or losing your job.
The mystery shoppers found PPI providers were not "treating customers fairly" – which is FSA jargon for mis-selling. It means people are being sold PPI who ought not to be.
I have never understood the appeal of PPI. By taking out insurance for a loan, the borrower is basically protecting the lender. OK, if the repayments are taken care of, but that does nothing to solve the central problem of how he or she is going to be able to afford to live. In other words, the bank gets its pound of flesh but the borrower is still flat broke. What's more, PPI is often sold with unsecured loans, which means that the risk of default is already priced into the deal. So by taking out PPI on top, the borrower is in essence paying double.
Add to this the point that PPI has often been sold in the past to self-employed people, who can be barred from making a claim, and it doesn't take a genius to work out that PPI is simply a rank bad deal.
Following its mystery shop, Clive Briault, the FSA's managing director, promised enforcement action. And this is where the déjà vu kicks in. At the start of the year, the regulator embarked on a PPI crackdown: according to briefings given to journalists, up to 10 firms were in line for heavy fines. Eventually, however, just five firms were fined a combined £1.5m. Sound like a big number? Not when you set it against the estimated £5bn PPI market.
The truth is that PPI providers got off lightly last time. The FSA wouldn't even brand what were clear instances of mis-selling as such. In January, GE Capital was fined £610,000 (including a 30 per cent "discount" for owning up at an early stage of the inquiry) for failing to "review, amend and then operate its sale procedures to ensure that all customers received adequate information... before they made a decision on whether to take insurance". That's mis-selling to you and me.
The best part of a year later and little seems to have changed with PPI. So when Mr Briault and his team discuss what to do next, they must consider bigger fines, ending discounts for early co-operation, reviewing terms and conditions across the industry to make them fairer, and calling a spade a spade – actually using the word "mis-selling"'. Otherwise, déjà vu will strike again and again.
Lenders aren't getting the message on PPI mis-selling, says the FSA
Published: 30 September 2007
http://money.independent.co.uk/perso...cle3013030.ece
Credit card, loan and mortgage providers are still mis-selling payment protection insurance (PPI) despite warnings and a series of regulatory fines, according to the Financial Services Authority.
The FSA carried out "mystery shopping" exercises to examine the way in which 150 firms sold PPI. It found widespread failings.
In particular, the City regulator was alarmed that providers weren't outlining the cost of policies and what they actually covered.
PPI is meant to pay out if someone is unable to meet the repayments on their credit card, personal loan or mortgages, usually if they fall sick of lose their jobs.
However, the cover has been criticised by consumer groups and the Office of Fair Trading for offering a poor deal and containing unfair terms and conditions. It has been estimated that PPI sales boost bank and insurer coffers to the tune of £5bn a year.
The FSA has been striving to clean up the market for the past two years. During this time it has fined five firms over £1.5m in total.
But following its latest shopping exercise, more fines and enforcement action may follow. "While some progress has been made by the industry, we are extremely disappointed that some firms have still made little progress in improving their sales practices," said the regulator.
Will the FSA now take action?
igs:igs:igs:igs:Julian Knight: 'Mis-selling' is the word – be bold enough to use it
Published: 30 September 2007
http://money.independent.co.uk/perso...cle3013026.ece
It was déjà vu last Wednesday when the Financial Services Authority (FSA) released its findings from a "mystery shop" of payment protection insurance providers. PPI is designed to meet the loan if you can't repay it due, say, to injury or losing your job.
The mystery shoppers found PPI providers were not "treating customers fairly" – which is FSA jargon for mis-selling. It means people are being sold PPI who ought not to be.
I have never understood the appeal of PPI. By taking out insurance for a loan, the borrower is basically protecting the lender. OK, if the repayments are taken care of, but that does nothing to solve the central problem of how he or she is going to be able to afford to live. In other words, the bank gets its pound of flesh but the borrower is still flat broke. What's more, PPI is often sold with unsecured loans, which means that the risk of default is already priced into the deal. So by taking out PPI on top, the borrower is in essence paying double.
Add to this the point that PPI has often been sold in the past to self-employed people, who can be barred from making a claim, and it doesn't take a genius to work out that PPI is simply a rank bad deal.
Following its mystery shop, Clive Briault, the FSA's managing director, promised enforcement action. And this is where the déjà vu kicks in. At the start of the year, the regulator embarked on a PPI crackdown: according to briefings given to journalists, up to 10 firms were in line for heavy fines. Eventually, however, just five firms were fined a combined £1.5m. Sound like a big number? Not when you set it against the estimated £5bn PPI market.
The truth is that PPI providers got off lightly last time. The FSA wouldn't even brand what were clear instances of mis-selling as such. In January, GE Capital was fined £610,000 (including a 30 per cent "discount" for owning up at an early stage of the inquiry) for failing to "review, amend and then operate its sale procedures to ensure that all customers received adequate information... before they made a decision on whether to take insurance". That's mis-selling to you and me.
The best part of a year later and little seems to have changed with PPI. So when Mr Briault and his team discuss what to do next, they must consider bigger fines, ending discounts for early co-operation, reviewing terms and conditions across the industry to make them fairer, and calling a spade a spade – actually using the word "mis-selling"'. Otherwise, déjà vu will strike again and again.
Lenders aren't getting the message on PPI mis-selling, says the FSA
Published: 30 September 2007
http://money.independent.co.uk/perso...cle3013030.ece
Credit card, loan and mortgage providers are still mis-selling payment protection insurance (PPI) despite warnings and a series of regulatory fines, according to the Financial Services Authority.
The FSA carried out "mystery shopping" exercises to examine the way in which 150 firms sold PPI. It found widespread failings.
In particular, the City regulator was alarmed that providers weren't outlining the cost of policies and what they actually covered.
PPI is meant to pay out if someone is unable to meet the repayments on their credit card, personal loan or mortgages, usually if they fall sick of lose their jobs.
However, the cover has been criticised by consumer groups and the Office of Fair Trading for offering a poor deal and containing unfair terms and conditions. It has been estimated that PPI sales boost bank and insurer coffers to the tune of £5bn a year.
The FSA has been striving to clean up the market for the past two years. During this time it has fined five firms over £1.5m in total.
But following its latest shopping exercise, more fines and enforcement action may follow. "While some progress has been made by the industry, we are extremely disappointed that some firms have still made little progress in improving their sales practices," said the regulator.
