Tougher Action On PPI Mis-selling
According to an article published by BBC News, the Financial Services Authority (FSA) states that many companies are still failing to deliver customers with sufficient information regarding the purchase of a Payment Protection Insurance (PPI).
In conjunction with their latest survey the FSA has carried out a ‘mystery shopping’ exercise as part of a plan to further examine some 150 insurance firms. They are now being forced to take stronger action and impose bigger fines on those companies who fail to ‘clean up their act’.
Clive Briault of the FSA said “While some progress has been made by the industry, we are extremely disappointed that some firms have still made little progress in improving their sales practices. The customers must be told how this product works, what it covers and how much it costs. At present too many companies are not meeting these requirements."
A PPI policy in theory pays out if the policy holder is unable to make repayments on their higher purchase agreements i.e. credit cards, personal loans or mortgages should they fall sick or lose their job.
The problem lies in the fact that many firms are failing to provide customers with a clear explanation of what the policy actually covers or excludes, why they would ever need it and how much the insurance will actually cost.
The Office of Fair Trading (OFT) last year claimed that many PPI policies provided customers with a very poor deal by actually offering less protection than they initially thought. Further critics go on to say that despite the £5billion revenue PPI’s bring in annually for those banks providing them, only a very small percentage of customers are able to make a claim on their policies.
The FSA can confirm that the majority of firms are now making their policy terms much clearer by making sure customers know it is optional. For those customers who have already paid up-front for their policy, with a single payment, a refund is now being offered.
5 firms have since been fined a total of £1,566,000 and 2 others have been censured, while other firms have dropped the idea of selling this type of insurance altogether. The FSA is giving firms due warning to comply to the required standards and any who fail to do so will now be subject to even higher fines for serious breach of the rules.
Published on September 28, 2007
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