New research from the Financial Services Authority (FSA) reveals that finance companies are still failing to be open with Payment Protection Insurance (PPI) customers. PPI is sold with credit cards, loans and mortgages, supposedly to protect customers in times of crisis, such as redundancy or long-term illness.
Although the FSA recognises that some improvements have been made by PPI providers, its latest review of 150 firms – which included mystery shopping campaigns – revealed that a high proportion of companies selling PPI alongside unsecured personal loans remain evasive in their sales approach.
Reports indicate that this PPI ‘swindle’ could be costing consumers approximately £5.4 billion a year.
“The FSA’s findings show a real lack of transparency from companies selling PPI. Many customers are left confused by advice given and, of those who have already purchased the insurance, a high number feel that policies are being mis-sold,” said James Caldwell, director of Fair Investment Company.
The authority recognises that companies are doing a better job of telling customers that PPI is in fact optional and that many have now started offering cancellation refunds on almost all types of single premium PPI policies.
However, it found that providers are not doing enough to ensure customers fully understand the product or how much it will end up costing. Many customers are not told what they will be covered for, or to what extent they are eligible for PPI.
Alarmingly, an estimated 85 per cent of people who have claimed on their PPI policy have actually been denied cover, according to the Citizens Advice Bureau.
The FSA has declared it will be taking decisive action against firms who appear to be flouting the rules, including levying substantial fines. Four firms are to be investigated as a result of its research and a further 20 may be scrutinised in the near future.
The authority also found that 11 companies have stopped selling PPI, either permanently, or on a temporary basis while staff undergo training about the product. In addition, four companies are now evaluating past PPI sales to assess whether they were appropriate.
Bradley Askew, managing director of Claims Financial, a company that helps people reclaim money they have lost through unfair insurance policies, said: “In the last few weeks alone we have had hundreds of enquiries into the mis-selling of payment protection insurance. I spoke with one gentleman who had been mis-sold five times with the same company in a six-year period. He had been told on every occasion that the PPI was compulsory and that without it he would be unable to get the loans that he needed. Needless to say he is thousands of pounds out of pocket.
“I am also coming across a number of cases where individuals were not told that their monthly loan re-payments included a 30 per cent uplift to pay for this PPI. Had they been asked whether they wanted to buy this financial product, they either would have said no, or would have shopped around for the best offer. In some cases the premium is 50 per cent of the total loan amount which, on a £20,000 loan, is scandalous. We are helping reclaim these premiums for consumers on a no-win-no-fee basis.”
Mr Caldwell continued: “Many people don’t realise that they also have the right to take action against providers that have mis-sold them insurance.”
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