Lenders to stop selling PPI
(PPI) is a topic we have mentioned before and not in a positive way!
Now, some of Britain’s biggest banks will stop selling PPI to those of you taking out a personal loan.
Alliance & Leicester, Barclays, The Co-operative Bank, Lloyds Banking Group, which includes Lloyds TSB, Halifax and Bank of Scotland, and RBS/Natwest have announced that they will stop selling single premium PPI with unsecured personal loans by the end of this month.
It follows signs that the Competition Commission is considering a ban on PPI.
Despite warnings that it could result in more expensive loans, the Commission is expected to outlaw the sale of single premium policies when it announces its final proposals to clean up the PPI market in the coming weeks.
But despite calls from the City watchdog for all loans lenders to review their sales practices, some, such as Abbey and Nationwide, will continue to sell the policies.
- Safety net?
PPI is supposed to be a safety net in case you suddenly lose your income through unemployment or ill health. But many of you were mis-sold policies and you would never have been able to make a claim. Particular problems surround single premium policies, where the cost of the cover is often added to the loan without your knowledge.
There have been more than 30,000 complaints about PPI to the independent complaints handling Financial Ombudsman Service, the majority of which have been upheld.
In October, Alliance & Leicester was fined a record £7 million penalty for mis-selling PPI. Egg, which was fined £721,000 in December for mis-selling, is still selling single premium PPI on its online loans, but says it plans to move to a monthly premium policy.
- Crackdown is welcomed
The move was welcomed by Jon Pain, of the Financial Services Authority,who said:
‘We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement as long as the policy is sold appropriately.’
The Commission recommended a ban on single premium plans and it also suggested that lenders be prevented from contacting you about the insurance within 14 days of a credit agreement being signed, and also called for advertising on PPI to be made clearer.
Lenders say any ban would only force them to push up rates on loans because they would no longer be able to subsidise deals with profits earned from the insurance. PPI has been one of the biggest money spinners for banks and is worth an estimated £3.5 billion.
- Lenders facing a losing battle!
But Louise Hanson, at Which?, the consumer group, said that PPI sellers know that they are facing a losing battle, saying:
“These firms have recognised that the party is over for single premium PPI and the rest should follow suit. People need to protect their finances more than ever so providers should be developing products that meet consumers’ needs and offer value for money. PPI has been widely mis-sold in the past so anyone with a personal loan should check if they have a single premium policy as they could claim their money back.’
Which? is using social networking site Facebook to encourage those of you that think you may have been mis-sold PPI to to reclaim your money.
It has launched Payback, an application designed to spread awareness of PPI among those of you who recent graduates or young professionals who may have been mis-sold a policy when you took out an unsecured loan or credit card.
Peter Jackson, of Lloyds Banking Group, said their decision to stop single premium sales was a direct response to consumer feedback, saying:
‘Lloyds TSB customers told us they valued the cover PPI provides but, as the economy moved into uncertain times, now wanted a more flexible product which would make it easier for them to manage their budgets”.
What do you make of the lender’s decision to stop selling PPI?
Given the amount of complaints, is it about time?