Financial Services and Business Bill - Too Little, Too Late - Stop PPI Providers Holding Customers to Ransom Says Burgess

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News that the Financial Services Authority will have increased power as a result of the Financial Services and Business Bill is to be applauded, but as is usual with a number of Government-led initiatives - it is too little, too late, says Payment Protection Insurance lobbyist, Sara-Ann Burgess from specialist firm Burgesses.

News that the Financial Services Authority will have increased power as a result of the Financial Services and Business Bill is to be applauded, but as is usual with a number of Government-led initiatives - it is too little, too late, says Payment Protection Insurance lobbyist, Sara-Ann Burgess ( from specialist firm Burgesses.

Earlier this week draft legislation was published with the intention of promoting stability, efficiency and competition in the financial markets. As well as strengthening regulation, it is designed to further protect and support customers and boost their financial capability, plus tighten up consumer-focused regulation.

However, Sara-Ann is concerned that the wheels of bureaucracy continue to move far too slowly and more effective measures need to be implemented now to protect consumers against unscrupulous financial services providers who do not have customers' best interests at heart.
The PPI sector in particular has been slated over the years for failing to treat customers fairly and despite a two-year long investigation by the Competition Commission into policy mis-selling, followed by a damning verdict that called for sweeping changes, nothing is in place to protect consumers against over-pricing, poor product design, irresponsible and pressurised sales and poor claims administration.

PPI is designed to pay claimants a pre-determined income in the event their salary is interrupted because of accident, sickness and unemployment and is particularly important in this current claimant as it can help keep families financially afloat during times of hardship.

Although a number of remedial measures have been identified to put things right in this beleaguered sector, it won't be until 2010 before any of them come into force. Recommendations include; a ban on lenders selling PPI at the time a loan is taken out and for 14 days after, a ban on the sale of single premium policies (where the cost of the policy is added onto the loan amount and interest charged on both), the need for lenders to separate out the PPI quote from the loan cost and an undertaking to provide more information to allow consumers to shop around for cover.

In a bid to hold-up the roll out of the Commission recommendations, two providers have challenged the ruling, giving lenders a free hand to move the goal posts when it comes to policy terms and conditions and so increase the likelihood of consumers falling victim to underhand sales tactics.
Sara-Ann comments: "PPI providers have behaved shamefully over the years, taking millions from vulnerable consumers. They know customers are paying over the odds for cover and in many cases, will never be able to claim. Even more damning are the instances where providers in the past few months have turned their backs on consumers when they need them most."

Her comments refer to actions by credit providers with a monopoly on PPI - around an 80% market share - who have recently increased premiums by up to 70%, reduced the benefits payable and 'ring-fenced' certain professions and sectors as uninsurable.

Sara-Ann continues: "Take-up of this product has traditionally been low which is why providers pressurise people into buying cover when they take out a loan. In recent months demand for cover has increased amidst fears of increasing unemployment. But instead of responding with a pledge to provide consumers with an affordable safety net that will repay their financial commitments in the event of a job loss, they are penalising customers - cherry picking who they want, paying out less and charging more into the bargain."

In April the Post Office gave customers 30 days notice of its intention to restrict their PPI payouts to a maximum of £1500, instead of £2500, and increased the waiting period from 60 to 90 days.
The Financial Services Authority this month met with a number of trade bodies representing PPI providers to voice concerns that consumers with PPI are not being treated fairly. It questions why providers are making changes at a time when demand for cover is rising and says it will intervene to address poor customer treatment. The response from the trade bodies is that 'discussions are continuing'.

"This is a week response," says Sara-Ann "and demonstrates why we need action now. We've known since 2005 - when the Citizens Advice Bureau lodged its super-complaint with the Office of Fair Trading - that providers in this sector were ripping off consumers and preying on their vulnerabilities. Since then complaints to the Financial Ombudsman Service have rocketed to over 31,000 and an increasing number of firms have been fined. However, this does not appear to stop providers acting immorally."

Gordon Brown says through the future Financial Services and Business Bill, the Government will toughen regulation in the financial services sector, ensuring the FSA has sufficient powers to do its job.

Sara-Ann concludes: "I fear this is rhetoric and will have little immediate impact on consumers. Yes, increased regulation may reduce the number of PPI providers treating customers unfairly, but how long will we have to wait? It's been four years since the initial PPI investigations started and April and October 2010 are the first dates set for change - and even this is doubtful.

"Actions speak louder than words and until the FSA is able to demonstrate its clout and punish PPI providers who continue to ruin the reputation of all in this sector, consumers will continue to suffer. Rush through this Bill now, better empower the FSA and restore confidence in a product that provides a financial lifeline for those in difficulty."

More reputable independent firms, not linked to the provision of credit, offer premiums that are way below those quoted by High Street lenders. British Insurance (, for example, charges £3.40 per £100 of benefit for unemployment only cover, the provider has never received a product or service complaint and has won more third-party awards and endorsements than any other PPI firm. It also ensures claimants receive pay outs from day one and has not restricted cover of those it will insure.


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