Competition Commission concerned over competition with PPI
The financial news has been filled with stories about problems relating to payment protection insurance or PPI, with evidence that this insurance has been mis-sold to consumers for a number of years, and that lenders were using a range of tactics to try and make borrowers take out this cover when taking out finance.
The UK’s financial regulator, the Financial Services Authority, has been clamping down on those found to be mis-selling this cover, and a number of lenders and providers have been fined over recent months, with one lender, the Alliance & Leicester, being fined around £7 million as a result of these breaches. More recently further probes and investigations have been launched into the sale of PPI following the receipt of a record number of complaints from PPI customers.
An investigation by the Competition Commission has revealed that there is very little competition amongst providers of PPI, and many credit card firms and banks are making a fortune from consumers who are taking out these policies along with their credit cards, loans, and other forms of finance. The lack of competition means that consumers that want to shop around for a more affordable policy and those that want to switch to another provider will find it difficult to find something that is better suited to their needs and pocket.
This type of insurance cover is commonly sold alongside financial agreements, such as loans and credit cards, and the purpose of the cover is to cover repayments on the debt for a specified period of time in the event that the policyholder is unable to work due to sickness, injury, or redundancy. However, ongoing investigations have revealed that the cover has been sold to many consumers that would never be eligible to claim, and that some lenders have convinced consumers that they have to take the cover from them along with the loan or card. Some lenders were found to be adding the cover onto finance deals without informing the consumer at all.
Whilst authorities have been trying to stamp out these problems through stricter regulations and by imposing fines, it appears that the problem is still ongoing. Many consumers are still complaining about PPI, and the FSA recently conducted a mystery shopper exercise to better evaluate the problems. It was found that lenders were failing to provide adequate details about the policy to consumers, and that few consumers were fold that the cost of the cover would be added to the loan and that they would then have to pay interest on it.
A number of possible solutions are being considered to try and stop the issues connected to PPI sales. This includes stopping certain firms from selling the cover, stopping lenders from selling the cover at all alongside credit agreements. Another solution being considered is heftier fines for those firms found to be breaching PPI sale regulations.
Related Posts
PPI has very little competition says Competition Commission
PPI or Payment Protection Insurance has been at the centre of controversy for some time, with investigations revealing that in many cases this costly insurance cover was being mis-sold to consumers who did not want it, did not need it, and could not even benefit from it in some cases. PPI is a type of insurance cover that is sold alongside finance such as loan or credit cards, but it was revealed that many lenders were using persuasion tactics to sell it, making consumers believe that they had to take it, or were even adding it onto agreements without the consumers’ knowledge. »
PPI with loans to be banned
Officials from the Competition Commission have recently confirmed that the sale of the controversial insurance cover known as Payment Protection Insurance or PPI is to be banned in 2010.»
Single premium PPI to be stopped soon
Lenders and PPI providers have been told by regulators that they will have to stop selling the highly controversial single premium PPI, or payment protection insurance, over the coming months, and providers have now been given a deadline by which they must have ceased selling this type of insurance cover. »
Should you consider payment protection insurance?
For the last couple of years payment protection insurance, known simply as PPI, has hit the financial headlines on a number of occasions, and this is because of a number of problems that regulators have picked up on with regards the both the sale and the effectiveness of this cover. PPI is a type of cover that is designed to cover your repayments on a loan or other form of finance for a set period of time in the event that you cannot meet the repayments due to sickness, accident, or redundancy. The idea behind PPI is that having your repayments covered for a specified period will enable you to get back on your feet or get another job without the added worry of how to pay your debts.»
Is now the time to take out PPI?
The subject of PPI, or Payment Protection Insurance, has been a controversial one for the past couple of years, with a huge amount of controversy relating to the mis-selling or this cover, and financial authorities really clamping down on lenders and providers that are found to be breaching guidelines relating to PPI sales. The bad press has resulted in more people either deciding not to take out this cover over the past couple of years, or has resulted in fewer policies being taken out because of reduced pressure from lenders and providers who are aware of the crackdown by authorities such as the Financial Services Authority.»