Mis-selling of PPI widespread, despite probes
0 Comments | Herald, The; Glasgow (UK), May 26, 2007 | by SIMON BAIN
THE supposed clampdown on the selling of payment protection insurance (PPI) is having little effect so far, with frequent mis- selling and a low rate of successful claims, according to Citizens Advice Scotland.
The Office of FairTrading in February referred the selling of PPI to the Competition Commission, while the Financial Services Authority has been probing the market since last year and in January levied a hefty fine on major provider Capital One Bank.
Earlier this month consumer group Which? reported that consumers are being tricked into buying expensive PPI when taking out a personal loan over the phone or internet, as a result of some providers adding PPI as a matter of course during the sales process.
Now Citizens Advice Scotland says some of its clients are being “pressurised into taking out PPI through aggressive sales techniques”, according to its chief executive Kaliani Lyle. “Others say they were given the impression it was compulsory to take out some sort of insurance policy. Some clients even later found they were paying for policies they had actually refused.
“Our client case-evidence also shows that PPI is often sold to clients who cannot possibly claim on the policies they have taken out – such as people employed in agency work or who are self- employed.
“Other clients have found that they are not covered because of their age. Information about exclusions is often hidden in small print and not made clear to consumers when they first consider taking out PPI.” Research by CAS has found that over 90per cent of claims made on PPI policies had been turned down – usually on exclusions relating to medical conditions.
A north of Scotland client who bought a carwith a GBP7000 loan was told he had to take out PPI with a specific company, adding over GBP3000 to the loan amount, and GBP6000 when interest on the loan – and the policy – were added.
A west of Scotland client who was in receipt of income support and carer’s allowance had been sold PPI by a bank despite having been unemployed for six years. The bank “eventually agreed to refund the insurance – a sum of GBP1700″.
A retired 67-year-old south of Scotland client was persuaded to borrow GBP2600, on top of a GBP7300 loan, to buy insurance against losing her job. When questioned, the bank admitted that “the person dealing with her application would have been under pressure to sell insurance”.
The only policies affected by the FSA’s new ruling on partial refunds are “single premium” (one-off payment), and the refund entitlement does not apply to cancelled policies. That means millions of people who, like Jim Brogan (case study), have surrendered PPIlinked endowments have lost out, though under the new rules they would be entitled to refunds when surrendering.
Simon Burgess of British Insurance, a low-cost provider, believes the FSA should ban single premium policies altogether as they fly in the face of its new mantra “treating customers fairly”.
Burgess says: “In the mortgage sector, the cover lasts around five years, and then the consumer is contacted and asked to take out another policy with more expense
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