It is common knowledge that there have been three major ongoing investigations into the payment protection industry conducted since 2005 by the Financial Services Authority, Office of Fair Trading and the Competition Commission. This has included all forms of payment protection insurance, including loan protection insurance and mortgage insurance. The latter came under scrutiny the most for a while as mortgage lenders said it should not be investigated at all. Nevertheless, the investigations have turned the general public against the idea of payment protection in many respects, but there are some facts that the public should know regarding the investigations before discounting the idea of loan protection insurance altogether!The following points have been made during the course of the payment and loan protection insurance investigations and they highlight the areas that consumers should be concerned about and those they should not:
• Whilst high street banks and lenders came in for a lot of criticism during the early and mid sections of the investigations, independent providers of specialist standalone policies did not. They were largely left alone because few complaints had been made against them. In fact, smaller companies welcomed the investigation because they had been forced out of the marketplace by rumours that were perpetuated by the banks (that consumers could only take protection before the loan was approved and that they could only cover the loan at that specific bank).
• High street banks and lenders were criticised for mis-selling loan protection insurance for a number of reasons. One particular complaint was that the protection was actually extremely expensive, with a related point being that it offered poor value for money as a result of the fact that many people sold the policies could not have claimed on them because they were not eligible for the cover. High street banks had simply forced the sale without checking for eligibility.
• High street banks and lenders were also found to sell without informing the customer of what the policy is and what it provides for. This is rather deceptive because many individuals now believe loan protection insurance to offer no real value but that is not true. It is a very valuable product if it is used correctly but, as independent providers point out, the consumer has the right to know all about it before they choose whether to take it out or not. Given the choice, most people would opt to have it but that choice has not always been forthcoming!
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