| Financial firms under scrutiny over PPI |
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Financial services firms that sell Payment Protection Insurance (PPI) have been told to tighten their screws regarding their selling methods by the Financial Services Authority (FSA). They had to resort to this extreme measure as a third of the 45 firms surveyed had sold policies to customers who could not claim on them. Banks may have to cough up fines worth over millions of pounds for mis-selling of controversial and expensive loan insurance.
PPI is ideally supposed to help people repay their loans in times of contingency. This scheme is a huge money-spinner for banks. According to a report from Credit Suisse First Boston, 10% of banks' gross profits may come from PPI alone. This scheme is supposed to be worth around 5 billion pounds.
Clive Briault, the FSA's Managing Director for Retail Markets, said: “Those firms where these problems exist must take urgent action to address them.” The Financial Services Authority has given the banks time till the spring to “put their house in order” or face a full investigation.
The FSA’s move was hailed by the consumer body Citizens Advice, which in September had demanded the Office of Fair Trading (OFT) to examine as to how PPI was being sold.
"We badly need an official investigation ... The FSA report highlights the extent to which poor sales practices are endemic within the industry and the extent to which incentives are leading to mis-selling," said Dan Vale of Citizens Advice.
On the other hand, the Association of British Insurers, the British Bankers Association and payment services body APACS issued a statement saying that they were “keen to establish that the FSA's report should not be seen as indicative of the whole industry”. They also claimed that more than 15 million policies are in force and around 500,000 claims were settled last year.
The OFT has time till December 12 to decide if it will accept the super complaint made by the FSA. The FSA, meanwhile, would carry out a second round of checks in the beginning of next year.
Posted
on : Sat, 05 Nov 2005 16:15 GMT | Insurance News
By : Chris Rowe
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