High Street bank PPI mis-selling scandal leaves lenders with reputation issues and may also leave thousands of workers with no cover
- but not all apples in the barrel are rotten, says Paymentcare.co.uk
THE THOUSANDS of people who may have been mis-sold payment protection insurance by High Street banks and other prominent lenders should not lose out completely on cover, said PAYMENTCARE.CO.UK.
The UK's leading independent provider of stand-alone accident, sickness and unemployment (ASU) payment protection insurance (PPI) warned that continuing volatility in the employment market meant many people could leave themselves vulnerable if they abandoned cover altogether.
In the wake of the admission by Lloyds Banking Group - that it is setting aside up to £3.2 billion * to cover a potential flood of PPI mis-selling compensation claims - Paymentcare.co.uk's managing director Shane Craig said that there is probably more of a need for cover than ever before.
"We have long campaigned against the bullying tactics used by High Street lenders to drive people into taking out PPI insurance - often when they did not have a hope of claiming on it.
"But workers will we hope be aware that, while there have clearly been some rotten apples in the barrel, PPI still provides a vital function for those who have mortgages and other debts to service - which would be compromised if they were unable to work," he said.
"There is affordable, comprehensive cover available - it is a good product and useful in the correct circumstances - and people need to be reminded of this in the wake of all the mis-selling which has rocked consumer confidence," he added.
The banking industry today (May 9 2011) announced that it has abandoned a legal fight over the mis-selling of payment protection insurance (PPI). (source: BBC Online News, May 9, 2011)
The British Bankers' Association, which fought the case, said it would not appeal after losing a court challenge against new rules on mis-selling.
Other major High Street banks also joined Lloyds Banking Group in setting aside money in the face of potential compensation claims from the public.
Barclays Bank reported that it had set aside £1bn to pay compensation, HSBC £269m, while RBS said it too would not contest the court ruling.
Craig compared the current situation in the PPI market to issues that affected the sales of travel insurance before point of sale legislation changes came in.
"High Street lenders made substantial profits from selling PPI to people who did not need it and could not claim on their policies even if they needed to; part of the problem was the fact that policies were sold at the time when loans were taken out, with customers not given the chance or opportunity to reflect on what they were buying.
"This was wrong and is reminiscent of the bad days of opportunist travel insurance sales," he said.
Last month (April 2011) the Competitions Commission ruled that PPI could not be sold at the 'point of sale of the credit' until after seven days after the sale or, if later, seven days after the supply of a personal PPI quote ('point of sale prohibition').
The CC also ruled that lenders and providers now have an obligation to provide a personal PPI quote, setting out the cost of PPI along with details of the cover provided, along with an obligation to provide information in marketing material about the cost of PPI and 'key messages' - for example making it clear that PPI is optional and available from other providers.
"We have welcomed the new legislation - which we have long campaigned for - and consumers should be aware that there are good and worthwhile policies out there which will deliver protection should they become unemployed or too sick to work or have an accident resulting in being unable to work," added Craig.
"The controversy over point-of-sale activity - typically where banks and other lenders sold uncompetitive products to consumers at the point of taking out loans - means there are fewer options now when it comes to finding good, independent cover.
"Now with this new legislation, consumers will be properly protected from the point of sale pressure to take out cover, and can focus on getting good value cover to support their loans if they choose," added Craig.
* Lloyds Banking Group has set aside £3.2bn to pay compensation to customers who were mis-sold payment protection insurance (PPI).
The bank is inviting past purchasers of PPI to get in contact and lodge a claim for compensation if they think they were mis-sold the policies.