Lenders PPI profiteering days are numbered says Burgesses

The reign of ‘fat cat’ Payment Protection Insurance providers ripping off consumers with mis-sold and over-priced products is to end following intervention by the Competition Commission – and it can’t come soon enough – suggests PPI lobbyist Sara-Ann Burgess from Burgesses.

She explains: “For years consumers have fallen victim to pressurised selling tactics from High Street lenders who have a clear point of sale advantage over other PPI distributors. They account for over 70% of policy sales – a market share stronghold that has allowed them to mis-sell to and over-charge customers, in a bid to boost their flagging profits.”

However this is to change, following the Competition Commission’s announcement today, of its proposed remedies designed to increase competition in the PPI sector. They include;

Prohibiting the sale of PPI by a distributor to a customer within 14 days of the lender selling credit. This addresses the point of sale advantage and gives customers opportunities to compare products and providers.

Separating the PPI quote from the loan offer. Customers are to receive a personal PPI quote which outlines the price of the product individually and its cost when added to the credit product. If not given at point of sale, the credit provider must do so when contacting the customer to offer PPI.

Banning the sale of single premium policies - this acts as a barrier to customers switching and its costs are difficult to compare with other PPI policies.

Including certain information in PPI advertisements - such as the price of PPI, expressed in a common format of monthly cost per £100 of benefit, plus reference to the purchase being optional and products available from other providers.

Advertising personal loan and second charge mortgage PPI alongside any respective credit ads.

Providing the Financial Services Authority with information for use in PPI comparison tables.

Producing annual PPI statements, similar to the personal quote, encouraging customers to review their annual policies. This will make it easier when deciding whether to switch providers.

Sara-Ann comments: “The PPI sector has been under investigation since September 05, ever since it was referred to the Commission by the Office of Fair Trading. Since then a number of independent providers have lobbied for change, aware of the scale of the mis-selling practices and frustrated at the lack of regulation to rein the perpetrators in. I’m delighted that common sense and fairness has prevailed and measures will at last be put in place to protect consumers.

“What’s interesting is that the recommendations echo everything independent provider British Insurance has advocated for years; take away the lenders’ point of sale advantage, separate out the PPI quote and provide more information, ban single premiums – where a customer pays upfront for the cover and ends of paying interest on the cost of the loan and the accompanying PPI policy, clearly illustrate the costs so they can be compared to other providers and provide mechanisms for consumers to shop around.”

Sara-Ann concludes: “Customers have been severely disadvantaged by lenders’ anti-competitive practices and the Commission’s proposed remedial measures reflect the severity of the problem. It’s driven a cart and horses through everything credit providers do and is a welcome shake-up.”

Interested parties have until 4 December to comment on the Commission’s recommendations and its final report will be published mid January 2009.

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