A damming statement from the financial service industry’s watchdog, the FSA, shows that firms are still mis-selling payment protection insurance (PPI) despite previous warnings and fines.
In its latest checks on how PPI is being sold to consumers, the FSA mystery shopped advisers selling single premium PPI alongside unsecured loans.
The watchdog said: ‘We are disappointed by our initial analysis to discover the results of the latest mystery shopping of single premium PPI to be worse than expected. Firms rely on documentation to explain costs and exclusions without giving a proper verbal explanation even when the sales pitch is face-to-face.’
Payment protection costs
The FSA research found:
- very few customers were informed verbally that the cost of the payment protection would be added to the loan and would attract interest
- only half of all customers said they were informed verbally about the key limitations and exclusions of the policy and
- at the worst performing firms, very few customers were given adequate information on the cost of their policy.
FSA rules are clear about what procedures advisers must follow when selling PPI. Verbal information such as cost and exclusions under the policy must be given.
In the FSA’s words this information is: ‘fundamental to establishing a customer’s needs and eligibility.’ Omitting this information, says the FSA, ‘shows unacceptably poor levels of sales competence’.
Single premium PPI increases your debt to the lender
Single premium PPI is often sold to people taking out loans or finance agreements. The cost of the insurance is added to the loan effectively forcing customers to borrow the insurance premium and increasing their debt to the lender. Interest is then charged on both the loan and the insurance premium for the full duration of the loan.
To add insult to injury, most single premium PPI policies last for only five years, so if you have a loan that lasts longer than that, you end up paying for insurance that has expired.
Payment protection insurance campaign
Which? chief executive, Peter Vicary-Smith, says: ‘This damning evidence demands that the FSA stops dithering and takes decisive action to sort out the PPI market. Its weak response to date has done little to help the millions of people who may have been mis-sold policies or to improve sales practices. The FSA needs to use its full range of enforcement powers in the interest of consumers.
‘Single premium PPI is of particular concern so sorting out this area should be a priority. We also want to see the FSA force firms to contact their PPI customers to inform them about the problems with the market, what constitutes a legitimate sale and what to do if they think they were mis-sold their policy.”
If you think you may have been mis-sold PPI Which? can help. The Which? PPI campaign will tell you whether you have grounds for complaint and there’s a template complaint letter you can use.