Following criticism from consumer watchdog Which? that the length of time it's taking to reform the selling process of payment protection insurance is failing customers, the FSA has announced it will step up its investigation into the controversial product.
Which? chief executive, Peter Vicary-Smith says the FSA's "weak response" so far 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." he said.
Jon Pain, managing director of the FSA's Retail Markets, said that "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."
He also suggested that "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."
Which? wants to see sellers of PPI contacting their customers to inform them about the problems within the market, clearly explaining what constitutes a legitimate sale, what the customer should do if they think they might have been mis-sold payment protection insurance
, and how to make a payment protection complaint
Due to poor findings in its investigation heretofore, the FSA has said it will be "escalating its regulatory intervention" of the industry, and will "consider actions to identify and remedy non-compliant past sales, using a range of regulatory powers at its disposal."
From its ongoing investigation into the practice of selling PPI, the FSA has found that very few customers are told that the cost of the payment protection insurance would be added onto the loan as a single premium and that interest would be charged on this amount. It also found that only half of customers were told about the key limitations of the policy, and many were not told the total monthly cost of both the loan and the PPI.
Which? highlights the case of one couple who spent £22,568 in PPI payments on a £56,000 loan, which is demonstrative of the bugs in the loan insurance system.
Doug Taylor, Which? personal finance campaigns manager, thinks that "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."
It's time that "the FSA stops dithering and takes decisive action to sort out the PPI market." Mr Vicary-Smith added.
© Fair Investment