The financial services industry has a huge educational task to fulfil if it is to protect the millions of homeowners that are currently struggling with their mortgage.

Having been quick to offer debt to consumers, Sara-Ann Burgess, a director at payment protection insurance (PPI) specialist Burgesses and longstanding campaigner for a fairer market, said it was now time to make sure borrowers had the right information to help them through the difficult times ahead.

She explained: “We have all been very quick to enjoy the good things in life in recent years and now the bill has arrived things are not looking so rosy. For borrowers that suffer the unexpected blow of accident, sickness or unemployment meeting their financial commitments is going to be very difficult.”

Burgess highlighted recent reports that up to two million homeowners were considering taking a repayment holiday on their mortgage as clear evidence of the financial stress that many households were under.

She said budgets would already be stretched by the demands of Christmas and was not surprised that so many people were looking to take a breather from paying their mortgage.

However she added: “If so many people are on the edge when it comes to meeting their monthly payments, they are unlikely to cope should they lose their job or be unable to work. I don’t think there has been a more important time to make sure good quality PPI is at the front of borrowers’ minds in the last 15 years.”

Against a backdrop of ongoing investigations into the PPI market, Burgess said there was a lot of negative sentiment to deal with, but felt that things were swiftly improving.

Burgess said it was down to every independent provider of PPI to make sure they were offering the value and flexibility required by borrowers and to get the message across that good quality policies were available and had a massive part to play in the future welfare of Britain’s borrowers.

“Some businesses have already played a leading role in this regard,” said Burgess. “For many years PPI providers like British Insurance have really banged the drum for a better market offering cheaper, more robust products that provide the cover borrowers need at a price they can afford. In essence, PPI is a relatively simple product and there is no reason it cannot be priced and sold in a way that creates a secure and solid safety net for borrowers.”

Too many providers had become greedy over the profits they could make in this market and had lost their way in terms of offering good value. Burgess said the PPI market now had an opportunity to put things right and had to take the time and effort to significantly improve its offering and make consumers aware of what was on offer and how PPI could help them.

“As consumer education improves I believe providers like British Insurance, that have led the way in this market, will have a significant role to play in safeguarding the financial future of millions of UK borrowers. Whatever happens the industry cannot stand by and let borrowers leave their debt unprotected and vulnerable to a surprise change in their circumstances.”

The payment protection insurance (PPI) market is being urged to stave off impending financial disaster for millions and make use of the early information it has about the scale of the employment problems that are likely to hit home in 2009.

Sara-Ann Burgess, a lifelong campaigner for a better PPI market and a director at industry specialists Burgesses, said: “‘If only we’d known,’ is so often the cry heard after a financial firestorm has ripped through our communities. Well now we do know and it is time to do something about it.”

Hindsight may be a wonderful thing, but it is nothing when compared to foresight and while there may be problems ahead, Burgess said that our knowledge of them should be used to full effect.

“Borrowers, financial advisers and product providers all know that we are in a recession and that 2009 is going to be a very difficult year. We have to prepare for that and make sure we can handle the turbulence that we are about to fly through. Things were bumpy in 2008, but for the average borrower it will be 2009 when the real problems come home to roost,” commented Burgess.

The warning came on the back of unemployment figures showing the number of people out of work was rising faster than at any other time in the last 17 years. In November, the number of people claiming Jobseeker’s Allowance jumped by an alarming 75 000. There are now 1.07 million people claiming the benefit, according to the Office for National Statistics.

The total number of people in unemployment, including those not claiming Jobseeker’s Allowance, now sits at 1.86 million and has not been this high since 1997.

It is expected that the upward trend will continue and by the end of the year the total for those out of work will breach the 2 million mark, with many worrying it may go on to smash through the 3 million barrier over the course of the coming year.

“Now has to be the time to make a concerted effort to board up our windows and make sure we can limit the damage done by the coming storm,” said Burgess.

“The PPI market needs to make a massive effort to get its message across and make sure borrowers have access to simple, well-designed and affordable products. Providers like British Insurance have been excelling in this area for many years and I desperately hope that more firms follow its example in the coming months.”

Burgess said there would be no excuse for the industry if it let thousands of borrowers flounder because of accident, sickness and unemployment and that now was the time to make sure borrowers understood what was available in the PPI market, how much protection would cost them and how they could put it in place.

“I would like to see an industry wide effort to use everything from the media to marketing campaigns to let borrowers know just how PPI can help. In a year’s time it will be too late for a lot of people. I would really like the PPI market to grab the initiative, shake off much of the negative press that has surrounded it and deliver for borrowers in the UK.”

Mortgage brokers could leave themselves open to possible legal action in the wake of a wave of projected home repossessions, warns Burgesses.

New figures from the Council of Mortgage Lenders (CML) predicts that those standing to lose their home will jump from 45,000 this year to 75,000 next – a huge hike of 67 per cent.

But Burgesses believes that the situation has been made worse by the failure of many mortgage brokers to give ‘best advice’ to their clients.

Sara-Ann Burgess managing director of the independent protection insurance specialist explains:

“The Financial Services Authority (FSA) placed with mortgage advisers and other financial services intermediaries an onus of ‘treating customers fairly’ in their dealings with clients. Any advice given by a broker to a client must therefore include identifying and offering solutions to any scenario where the client cannot afford to make the repayments demanded by the lender.

“The obvious solution to avoid possible repossession because the client is unable to make payments because of accident, sickness or unemployment would be to recommend the client take out insurance cover in the form of mortgage payment protection insurance (MPPI) or another income protection policy.

“It seems obvious from the poor take-up of these insurances, and the predicted massive rise in repossessions, that brokers were not doing enough to impress upon their clients the need to guard against the unexpected – such as an economic slump.

“If brokers cannot prove that they brought the existence of this cover to the attention of their clients, even if it was rejected, then it is conceivable that there may be grounds for legal action on behalf of the consumer against the broker since it could be argued that they had not been ‘treated fairly’.”

She added that the CML must shoulder some of the blame too.

“When the numbers of repossessions started to noticeably increase last year the CML maintained that it was nothing to worry about as it was rising from a very low base. That might well have been the case, but it ignored the rising trend to the point where it is now warning that it will reach 75,000 by the end of this year and might possibly rise even further.

“It is a bit late now to flag up the perils of recession and subsequent repossessions for stretched homeowners. CML members were guilty of reckless lending and to hell with the consequences. They are always guaranteed to get some return on the home loans they issue. But it is a different story for those that home loans were loaded on to. They stand to lose everything – job, home and possibly even their family unit because lenders made access to cash too easy in a rush for sales volume.

“The once booming buy-to-let market epitomised the greed of some lenders that threw money at this sector as if it was a one-way bet. It will be the tenants of those landlords that will pay the price of this unfettered greed by losing their homes.”

The true effects of the economic collapse has yet to be seen with thousands of families facing the prospect of the New Year homeless, warns Burgesses.

The independent protection insurance specialist was speaking out following the publication this week of shocking new figures by the Office for National Statistics that revealed that unemployment is rising at the fastest rate for a decade.

Worryingly, the number of vacant positions in the wider economy has also contracted sharply creating an explosive cocktail of rising unemployment coupled with job scarcity.

The managing director of Burgesses, Sara-Ann Burgess, said: “Christmas is traditionally a time of giving – unfortunately all that is on offer for many workers this year are P45 notices and we can all do without them.

“And while the latest rise in the unemployment figures are depressing, it should be remembered that the thousands of people that have being made redundant in the last few weeks are not included and the actual picture on the ground is in fact much worse that these bald numbers show.

“But it is those newly unemployed workers that are also homeowners that will feel the cold depths of economic depression more than others. The threat of redundancy for them also entails the prospect of possibly losing the roof over their heads, should they be unable to find a replacement job quickly enough.”

People with property can, however, take action that gives them the best gift they could have in these troubled times – peace of mind.

“The best Christmas present that homeowners can buy for themselves is an insurance policy that guards against the worst-case scenario and they find themselves unable to make their mortgage repayments because of accident, sickness or unemployment,” advised Burgess.

“Mortgage Payment Protection Insurance (MPPI) can be bought relatively cheaply from specialist independent providers like British Insurance.

“However people need to act quickly. Insurers are already withdrawing the unemployment cover contained in traditional MPPI policies as they fear the recession will result in big exposures to claims.

“People also need to honest when taking out this policy, especially when it comes to declaring how secure they are in their current employment. Failure to be frank about this issue can leave insurers with a loophole to reject a claim.

“But cover can still be found and customers can search online where independent firms such as British Insurance has detailed information about the cost and extent of cover currently available.”

Moves to prevent mortgage brokers from selling mortgage payment protection insurance (MPPI) at initial client meetings have been welcomed by independent protection insurance specialist Burgesses.

The Competition Commission announced last week that it wants to see brokers banned from selling these products until at least a fortnight has passed from first meeting with the client. They can sell to the client providing he or she returns to them – advisers must not pursue the sale.

The client is however free to buy MPPI elsewhere after a 24 hour period has elapsed.

Burgesses believes that brokers have been abusing their position of trust with customers for some time. It hopes that the Competition Commission’s initiative will go some way to redressing the balance whereby the adviser has all the product knowledge coupled with the opportunity to put pressure on the client to close a sale right away.

Sara-Ann Burgess managing director of Burgesses said:
“Mortgage brokers have had plenty of opportunities in the past to clean up their act, but still many chose to go down the route of recommending products that are more suitable to lining their pockets than what is best for the client. They had no thoughts of compassion for customers that may eventually lose their house, only dreams of the hefty commission payments that would roll in.

“The Association of Mortgage Intermediaries (AMI) may claim that sales of MPPI made by their members is an ‘advised’ sale and is therefore made in the best interests of the client. But brokers became regulated almost by default and many retain the mindset of a previous era where TCF stood for ‘take commission feverishly’ and not ‘treating customers fairly’.

“As we move into a period of economic depression it is imperative that those people that actively seek to protect the roof over their heads by buying payment protection insurance are given the best possible advice and offered a wide range of appropriate products from a selection of suppliers – not simply pointed in the direction of those that pay the adviser the most money.

“Clients are often unaware that cheaper and better products can often be sourced and purchased on the internet from reputable providers such as British Insurance.

For these reasons I believe the Competition Commission’s move to restrict how brokers conduct themselves when selling MPPI products is both informed and welcome.”

Financial services consumers across the board are likely to suffer because of the wholesale failings we have seen in the payment protection insurance (PPI) market in recent years.

According to Sara-Ann Burgess, a vocal and continuous campaigner for improvements in the PPI market, widespread problems with PPI are putting a huge strain on the Financial Ombudsman Service (FOS) and putting it under significant pressure.

In turn, Burgess said this made it more difficult for consumers with problems in other areas to seek and receive fast and effective redress.

Burgess said: “The Financial Ombudsman has dealt with over 25 000 PPI complaints this year. This has clearly put a very significant amount of pressure on its resources and made it difficult for consumers with problems in other areas to receive the kind of attention and service they are looking for.”

In its latest newsletter, the Financial Ombudsman admitted it was facing problems and said that if businesses took a greater responsibility for treating their customers fairly, then it would not be needed to adjudicate in so many near identical cases.

The FOS said: “Responding to large-scale surges in complaints driven by ’single-issue’ consumer campaigns… is now becoming a regular feature of our workload. Traditionally, of course, the ombudsman’s role was seen as dealing with individual disputes relating to one-off issues. The ombudsman’s office was regarded as a kind of craftsman’s workshop – not a factory for mass-production.”

Burgess bemoaned the fact that the changing pressures being placed upon the FOS meant it was being forced into dealing with large scale single issues rather than being able to devote large amounts of time to more diverse problems.

She commented: “When the FOS has the time to research and investigate the wide range of problems that come before it, it acts as a final line of regulation, highlighting issues as they begin to appear. Unfortunately this function is being lost and the FOS is having to behave almost like a front line regulator because nothing is being done to effectively deal with high profile, single issue problems.”

Burgess said she agreed with the FOS when it said: “Of course, the ideal solution would be for all financial businesses to treat their customers fairly (and to put things right when they go wrong) – either because businesses recognise this is the right thing to do, or because of effective regulatory scrutiny.”

Looking towards 2009, Burgess said she hoped the Financial Services Authority and senior management in the firms under its remit would look to work more effectively together and deal with future issues before they swarmed out of control.

Burgess said both the regulator and financial providers had missed many opportunities to correct the problems in the PPI market and were now paying the penalty.

“Firms like British Insurance have been railing against many of the procedures in the PPI market for many years and the action that has finally been taken has been too long in coming. Had the market followed the lead of independent, ethical providers such as British Insurance and been quicker to take itself in hand, there would not be nearly so many consumers looking to complain.”

In the future, Burgess said she hoped issues would be dealt with much more quickly and effectively preventing the need for consumers in their thousands having to individually fight for redress. In turn this would free up the FOS to deal with the type of complaints it was set up to handle.

As personal debt levels continue to spiral out of control and national charities are coming under increasing pressure to help people solve their financial problems, Payment Protection Insurance lobbyist Sara-Ann Burgess suggests a policy that pays a monthly benefit if redundancy occurs, could reduce the number of those suffering financial distress.

According to the debt advice charity, National Debtline, an average of 23,000 calls have been taken each month this year and its total up until the beginning of December was 241,153. In 2007, 208,224 calls were handled and in 1998 this figure was 116,608.

The majority of calls in 07 were from people with debts relating to bank and building society loans, overdrafts and credit card or store cards and one in four owed between £5,000 and £15,000.

Sara-Ann comments; “In the space of 10 years the number of callers has doubled, indicating just how irresponsible lenders and credit providers have been. They’ve authorised loans and credit to people who may not have had the means to repay their debts within a given timescale and given their full support to those keen to follow the mantra ‘buy now, pay later’.

“It’s only now, amidst a recession, that common sense is prevailing – lenders and credit providers are not so free and easy with their money and people are being encouraged to live within their means.”

With unemployment figures soaring and news of redundancies now a daily occurrence, Sara-Ann believes anyone with monthly bill commitments should undertake some proactive debt management in the form of a PPI policy that will meet those commitments should they lose an income stream.

“No one wants to see an increase in calls to National Debtline next year, but if people don’t put measures in place now to protect their financial security, then the number of calls will continue to rise to unprecedented levels.”

In anticipation of increased pressure on charities due to soaring debt levels, the Treasury is releasing £5.85m worth of funding over two years, allowing National Debtline to increase its capacity with the recruitment and training of up to 50 debt advisers.

The charity, which is run by the Money Advice Trust, says it will allow it to keep up with demand for debt advice and expects a high proportion of calls next year to be from consumers facing redundancy or the threat of mortgage repossession.

Sara-Ann continues: “PPI helps prevent the mountain of debt piling up and so will reduce the number of people compelled to contact debt advice charities. It provides monthly payments that will meet some or all of your monthly bills, dependent on the premium paid, and the outlay compared to the return is miniscule - less than one family take-away a month.”

Independent PPI provider British Insurance charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. A person looking to receive a benefit of £600 per month for up to a year should a job loss occur would pay a monthly premium of £20.40.

British Insurance has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme. It has this year won a string of accolades for its policies and way in which it treats customers fairly.

Sara-Ann concludes: It’s great to see the Government pumping so much money into charities to help them cope with the demand for their services, but wouldn’t it be better to proactively manage the situation now, rather than offer to help consumers when they are struggling?

“Measures need to be put in place to manage the debt before it gets out of control - perhaps some of the Government’s funding should have gone towards helping the most financially vulnerable pay for a PPI policy.”

Banks and building societies are failing their customers when selling Payment Protection Insurance and remiss when handling complaints according to PPI lobbyist Sara-Ann Burgess from Burgesses.
Her comments follow feedback from the Financial Ombudsman Service’s Chief Ombudsman, Walter Merricks, who recently voiced concern over the escalating number of PPI complaints his staff are having to deal with.

PPI pays a monthly benefit should an individual’s salary stop due to accident, sickness or unemployment, meeting bill commitments for up to a year. Whilst invaluable in this current economic climate, consumers are wary of a product that has drawn so many complaints and are turning their backs on this cover and leaving themselves unnecessarily exposed to financial hardship should redundancy or illness occur.

Since January this year, the FOS has received over 25,000 complaints relating to the sale of PPI. Merricks comments that traditionally, the Ombudsman’s role was seen as dealing with individual disputes relating to one-off issues and advises eyebrows would be raised at the FOS handling a workload involving thousands of similar complaints, all with the same financial product or problem.

Sara-Ann says: “It’s more than eyebrows that should be raised – the Financial Services Authority should heavily fine and ‘name and shame’ the perpetrators responsible for the highest proportion of complaints. Then it should ban them from selling PPI.”

She continues: “Lenders clearly don’t have the processes in place to treat customers fairly in the first place and then fail again, when it comes to handling complaints. It’s all too easy to fob-off dissatisfied customers in the hope they won’t want the hassle of having to contact the Ombudsman – well these figures prove otherwise.

“High Street PPI providers must get their act together in 2009 and evidence they really are doing the right thing – only then will the complaint figures come down. I’m sure they’d make changes if they thought they might lose this valuable income stream. It’s clear lenders don’t put customers first - they are arrogant, full of their own self-importance and undermining confidence in financial services as a whole.”

Merricks is also concerned that confidence in this sector is waning and warns that if businesses continue to be unable to puts things right when they are in the wrong then widespread redress to tackle widespread consumer detriment – ie a collective resolution – will be called for.

The FOS confirms that the majority of complaints are against the mainstream lenders and Sara-Ann believes a more effective and hard-hitting punishment is needed: “They obviously can’t be trusted to sell it in the right way to the right people, so only allow those who have a proven track record to sell the policies.”

Sara-Ann concludes: “Independent providers are a much safer bet – not only are the premiums more competitive, but the benefits are wider and consumers can be secure in the knowledge they will not be ripped-off. When properly sold PPI comes into its own during times of financial hardship – it allows claimants to keep their head above water via monthly insurance payouts that can be used to pay bills.

“Not only are the underhand tactics of lenders causing thousands of PPI policyholders to complain, but they are stopping thousands more from purchasing much-needed cover because the trust had gone. I urge consumers not to ‘tar all providers with the same brush’.”

Independent PPI provider, British Insurance, has this year won a string of accolades for its policies and way in which it treats customers fairly. The firm has a 100% customer retention rate and has never received a product or service complaint.

British Insurance charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

Consumers are being urged to check all of their payment protection insurance (PPI) policies in light of the huge fine that has been slapped on Egg Banking plc for serious failings in its sale of credit card PPI.

Sara-Ann Burgess, a director at PPI specialist Burgesses and a longstanding campaigner for a better PPI market, said the fine came as a timely reminder of the problems that still existed in the PPI market.

She commented: “I would say to anyone who has a PPI policy, that they should check exactly what it covers, what they are paying for it and make sure that it was something they actually wanted to take out in the first place.”

Burgess said too many people had been harried into buying a PPI product and either ended up with something they did not need or something that was not suitable for their circumstances.

This was not only a problem within the credit card sector, but also across the market, according to Burgess.

It was also important for consumers to make sure that they were not overpaying for the protection they had in place and Burgess said it was essential for consumers to look out their paperwork and see if there wasn’t a better deal on the market, that could provide them with the same cover, but cost them less each month.

“The policies that Egg has been fined for, relate to sales that were made between January 2005 and December 2007. Many individuals will have forgotten the details of their cover and just be used to the monthly amount they are paying for it. However for those who need the cover, it is very likely they will be able to find a cheaper alternative on the market through a provider such as British Insurance.”

In the past, Burgess said that the majority of consumers had taken PPI cover from the same firm that had offered them the credit. Whether buying from a mortgage, loan or credit card provider, Burgess said this tended to be an expensive way to go and urged consumers who had done this to take a moment to see if there might not be something cheaper available.

“PPI at its best is an excellent product and I would love to think that everyone who has bought PPI is getting value for money and enjoying the security afforded by the cover. However this simply is not the case as Egg’s fine all too clearly proves. Hopefully consumers will take the chance to review their own personal situation and make sure they are getting the best of what’s on offer.”

Burgess said specialist intermediaries like British Insurance would be able to guide consumers towards the best products available and in many cases would be able to rearrange the cover they had in place and save them money at the same time.

With borrowers facing such a tough financial climate, Burgess said such a move would help them cut their monthly outgoings without having to forgo their insurance.

Next year may be the year of the Ox as far as the Chinese calendar is concerned, but for borrowers in the UK it will be the year of protection.

The changing economic environment has made borrowers nervous of their ability to service their outstanding debt and made them more aware than ever of the risks presented by accident, sickness and unemployment, according to Sara-Ann Burgess, director at payment protection insurance (PPI) specialist Burgesses and a tireless campaigner for a fairer PPI market.

In the much leaner financial world that is unfolding before our eyes, Burgess said there was a growing realisation that should borrowers be hit by something that unexpectedly prevented them from earning, living up to their financial commitments would be very difficult. Increasingly she believed people would not take that risk heading into the New Year.

She said: “Whether it is city workers who are used to living high on the hog or factory workers with less lavish lifestyles, borrowers across the UK have got debt they need to pay off.”

Looking to the months ahead she added: “There is a growing sense among people right across the country that problems can come home to roost for anyone, and certainly I have not come across a single sector of the working community that believes it will be immune to the recession we are now in. People who have never considered taking out PPI in the past are now looking at it very seriously and I think we will see the market grow next year.”

Burgess said the need for financial providers to generate sales would also push them into offering ever more competitive rates and that this sort of pressure would be very welcome in the market.

For too long, Burgess said it had only been independent providers such as British Insurance that had really offered consumers the very best in both product flexibility and pricing, although she felt that more would have to follow suit if they wanted to win business.

Burgess explained: “There are a lot of proposed changes coming to the market about how and when PPI can be sold. Increasingly consumers are aware of the choices available and the changes will help them look past the high street credit providers they have normally bought protection from. I think we will see independent providers really excel in the coming year, while the high street banks and building societies will at last have to improve their offering if they want to compete.”

Burgess said this was great news for consumers and as more turned to the PPI market to help them stave of the financial threats posed by accident, sickness and unemployment, she believed the product and pricing they found would improve into 2009.

“2009 will be the year of protection,” she proclaimed.