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Bye-bye PPI?

Payment protection insurance has conjured up industry reaction yet again with consumer body Which? calling on the Financial Services Authority for reform, and the FSA itself announcing its plans to increase its intervention into the sale of PPI.

If the Complaints Commission’s investigation into PPI wasn’t enough, the “toxic” product continues to do itself no favours. The CC having already found providers overcharging borrowers taking out PPI by over £1.4 billion each year, a FSA mystery shopping exercise revealed providers are still failing to explain the flaws in the product.
As a result the FSA is now stepping up its intervention into the poor salesstandards of PPI. The regulator says the mystery shopping exercise revealed only half of customers said they were told about key limitations and exclusions of the policy and few customers were told that the cost of the plan will be added to the loan as a single premium with interest.
FSA retail markets managing director Jon Pain says: “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. Firms may wish to consider stopping selling single premium PPI sold alongside unsecured personal loans, given the continuing problems in the sales of this product.”
The news came the day of yet another Which? report into PPI mis-selling. The consumer body has written to the FSA calling for an overhaul of the PPI market citing as the worst example one couple paid over £22,000 in PPI for a £56,000 loan.
In the letter Which? is demanding compensation for consumers who have been misold PPI and for a robust endowment-style FSA review.
Which is demanding a strategy where companies would have to write to all PPI customers enclosing personalised information on how much they’ve paid as well as detailed information about the issues of concern surrounding PPI.
Which? personal finance campaigns manager Doug Taylor says: “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.”
Taylor says the FSA must do more to deter firms from mis-selling in the first place and have a “fair and robust system” to compensate all victims of mis-selling automatically.
However, the Association of British Insurers says the insurance industry has been working hard to improve the sales of PPI. And if Paymentcare.co.uk’s latest news release is anything to go by, consumers will continue to buy PPI for fear of being made redundant.
The FSA is expected to publish a further update on the third phase of its work around PPI in early 2009.

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