The FLA's comment over single premium policies is a clear indicator of the dent the abolition of these policies will have on members' profit margins. No longer will they be able to use the profits from single premium PPI to prop up loan losses - a tactic that's been suggested by those scrutinising this sector.
Braintree, Essex (PRWEB) November 14, 2008
The whining from financial services bodies in response to the Competition Commission's recommendations to tackle Payment Protection Insurance mis-selling reminds me of spoilt children who cannot get their own way, says PPI lobbyist Sara-Ann Burgess from Burgesses.
Remedial measures have today been proposed by the Commission in a bid to increase competition within the PPI sector and so benefit consumers. Those working in the interests of consumers have welcomed these proposals, however protestations have been lodged by the Association of British Insurers, Finance and Leasing Association and British Bankers Association.
Sara-Ann comments: "This clearly smacks of 'sour grapes' because their members will be unable to continue profiteering at the expense of consumers."
The ABI says the decision to ban the sale of PPI when taking out a loan will leave millions of consumers unprotected, increase their financial hardship and leave them unable to take out protection in a straightforward manner.
Sara-Ann counters: "What rubbish! The ABI clearly underestimates the intelligence of consumers - the Commission's 14 day ban on lenders peddling their own PPI empowers consumers, giving them time to shop around for a better deal. Consumers are hardly going to take out a loan and within 14 days say they are unable to make the first loan repayment, so this ban will not result in any hardship. It's more likely to increase the hardship for the lender whose profit margin will decrease.
"And is the ABI ignorant to the existence of the internet when it comes to purchasing straightforward cover? Put payment protection insurance into a search engine and numerous companies will come up. Many of them, such as British Insurance, are recognised as industry-leaders with award-winning products and services. Consumers are quite capable of deciding when and how they want to purchase cover and should not have it forced upon them. It also suggested these measures will deny consumers PPI - a knee-jerk response from an organisation who knows the time of reckoning has come for its members."
Similar sentiments were heard from the FLA who not only feared vulnerable consumers will go unprotected, but that the loss of single premium policies will result in worse terms.
"This response beggars belief," says Sara-Ann. "Over the years, its members have preyed upon the vulnerability of consumers and extracted excessive premiums from them. I fail to see how anyone can justify single premium policies - they result in consumers paying interest on the loan and the premium - it's a like a double whammy that lasts for years.
"The FLA's comment over single premium policies is a clear indicator of the dent the abolition of these policies will have on members' profit margins. No longer will they be able to use the profits from single premium PPI to prop up loan losses - a tactic that's been suggested by those scrutinising this sector."
'Without conscience' is how the BBA views the Commission. It opines the proposals will encourage people to borrow without back-up and criticises the Commission for going well beyond its remit. Sara-Ann replies: "It's a bit rich to be talking about conscience when BBA members clearly don't have one. Out of the £3.5bn worth of PPI sold by the 12 largest sellers in 2006, £1.4bn was excess profit. And let's not forget the Financial Services Authority recently fined Alliance & Leicester £7m after finding staff pressurised customers into buying policies they either didn't want or need.
"I suggest the only people who have gone well beyond their remit are those with a monopoly who have used their sales advantage to the detriment of consumers."
A view shared by consumer watchdog Which? who believes two million people purchased PPI only to find they cannot claim owing to the small print exclusions. The Financial Ombudsman is currently getting 100 complaints a day - the biggest source of grievances - and has called upon the FSA to take action to stop banks fobbing off customers who complain about PPI mis-selling.
Sara-Ann concludes: "Lenders suggest the Commission is reckless in pushing through its proposals, but I believe it's the lenders who are irresponsible - their actions have tarnished the reputation of more honourable PPI providers and only served to push consumers further away from this product.
"These bodies are clearly acting in their own self-interest, they profess to be concerned about consumers, but their actions over the years are contrary to this. They deserve to have PPI taken away from them, as the saying goes 'the punishment fits the crime'."