One step closer to better regulation of PPI
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Good news in the fight against unfair Payment Protection Insurance (PPI) charges. The Financial Ombudsman Service (FOS) has called on regulators to take more action to stop the mis-selling of PPI.
This year the FOS has been deluged with complaints about mis-sold PPI policies, and is upholding the majority of them. The FOS is reported to have ‘very severe concerns’ that complainants are being fobbed off by banks.
The FOS is currently receiving more than 500 complaints a week (!) about PPI policies, which are typically sold by banks when they make a loan to a customer. Most people will know that the insurance is supposed to cover someone in the event that they fall ill or lose their job and cannot repay a loan, credit card bill, or mortgage.
However, consumer organisations have criticised the insurance as useless and little more than a profitable protection racket for the banking industry. Which? has reported that 1.3 million people bought PPI when taking out a credit card, under the mistaken belief that it was compulsory or would improve their chances of having their application approved.
A spokesman for the British Bankers’ Association (BBA) has said action by the FSA is ‘unnecessary’. But that is hardly unexpected considering how much money they are making out of it.
The FOS is particularly worried that banks and other organisations in the financial services industry are failing to deal with initial PPI complaints properly.
Citizens Advice, which first lodged a formal ‘super complaint’ about PPI three years ago, said it was not surprised by the experience of the FOS.
The FOS has already had extensive discussions with the banking industry, but is worried that organisations that sell PPI are ‘not getting the message’. The FSA has already fined or censured 18 firms or individuals for mis-selling the insurance.
The Ombudsman has not asked for specific measures to be taken by the FSA. But its call is likely to prompt further action by the regulator, which has already been undertaking a long investigation into the way PPI is sold.
The investigation, which is now in its ‘third phase’, will come to its conclusions in the next few months and may lead to further restrictions on the way PPI is sold.
Earlier this year the regulator introduced tougher rules on how PPI could be sold and in June the Competition Commission concluded that banks and credit card companies were overcharging their PPI customers by a whopping £1.4bn a year.
The FSA blamed a lack of competition at the point of sale when people took out a loan, and suggested that selling PPI at the same time as approving a loan might be banned.
The commission will make its final recommendations in November or December. There is real hope that the PPI mess will now be sorted out but the banks will continue to protest their innocence with one hand and rake in the cash with the other until then.
