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This week in Mortgages

The payment protection insurance market took a battering this week, and the MPPI sector was not spared its share of abuse.

The controversial industry was not only once more slammed by the Financial Services Authority after yet another study revealed considerable failings, but it suffered the embarrassment of being referred to the Competition Commission by the Office of Fair Trading, as had been predicted by the likes of British Insurance¹s outspoken chief Simon Burgess many months ago.

The Council of Mortgage Lenders said it was surprising that MPPI was referred to the commission as it claims MPPI offers greater stand-alone cover than other forms of the protection product.

Yet while the prime mortgage PPI sector has largely been spared from major criticism over the past few months, many commentators have pointed to abuses in the sub-prime arena over the years, particularly where single-premium PPI is concerned. Such fears have spawned the rise of claim chasers in the sector such as Burgess¹ British Compensation which will launch next year and endowment claim specialist Brunel Franklin¹s Conkers PPI misselling brand.

While that issue will run and run so to, it seems, will the controversy around retention schemes. Alliance & Leicester mortgage guru Mehrdad Yousefi this week voiced concerns that schemes such as that from Halifax, that pay a full proc fee for retained business, make it easy for brokers to not treat customers fairly by not being given an incentive to shop around.

His line was constructive rather representing a full-blooded attack on his rival, and he did not reach a conclusion that HBOS is failing to treat treating customers fairly. He instead floated both sides of the argument over retention, though with the obvious hint that he does not like the Halifax scheme, and were a prelude to the news that A&L will conduct extensive research with its brokers before launching its retention scheme ­ something it has always maintained an interest in doing.

What Yousefi’s comments do is to stimulate further debate on an issue that seems to have polarised those that support retention schemes and those that do not firmly down the middle with little common ground.

While HBOS had to fend off some friendly fire on that issue, it came under slightly more hostile attack after a serious error saw thousands of Bank of Scotland customers have their mortgage payments taken up to three times this week, which would have left many overdrawn and led to numerous penalty charges from any subsequent cheques and payments that bounced as a result.

BoS has apologised and pledged to refund any charges as quickly as possible, and while mistakes can happen, many will hope this really is a one-off. The irony will not have been lost on many that at a time of OFT clampdowns on high overdraft and credit card penalty fees, in this case a bank¹s mistake will have led to many subsequent defaults and charges where the banking industry can then pick up further profit through charges, and the saga will have harmed people¹s credit ratings as well, pushing some prime borrowers into the near-prime spheres.

Another piece of HBOS news this week saw Intelligent Finance appoint ex-Scottish Widows head of product development Murdo McHardy to the new post of head of mortgages in what was the latest in a long line of high-level changes in the market over the past few weeks.

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