Rocketing numbers of borrowers are complaining to the Financial Ombudsman Service over being sold inappropriate loan payment protection policies by direct agents of product providers.
The FOS is concerned that direct-sales staff of banks and building societies have “little or no knowledge” of the insurance policies they are selling to borrowers after seeing a 20 per cent increase in complaints since last year.
It says borrowers may be under the false impression that they are being given advice when many brokers of lenders are acting as agents of insurance companies. This can often leave borrowers uncertain what they are paying for and unable to judge whether it is suitable for them.
The FOS believes agents often fail to determine a borrower's eligibility for a particular policy by only taking into account information volunteered by the customer rather than asking them appropriate questions.
It is calling for insurers to meet claims made by borrowers who have been sold inappropriate policies instead of simply refunding the premiums because they may be in danger of losing their home if they become unable to work.
Head of communications David Cresswell says: “This is our fastest-growing area of complaint because customers are not receiving enough information. There needs to be more transparency regarding any relationship there may be between providers and insurers.”
London & Country mortgage specialist David Hollingworth says: “This seems crazy. Providers should ensure that anyone selling MPPI products is as trained as possible so borrowers can make informed decisions.”