Following on from Financial Ombudsman reports that PPI complaints have more than doubled in recent months, Tonight with Trevor McDonald is set to examine the product which falls foul of so much mis-selling.
Tony Boorman, the principal ombudsman for the Ombudsman Service agreed that there is some systematic mis-selling: “It is certainly a very big issue for us, and I can well understand why customers are concerned about some of these issues because we’ve been upholding record numbers of complaints.” Indeed the Ombudsman are now upholding about two-thirds of complaints.
Over the last decade, the Ombudsman has received over 8,000 complaints about PPI with 1,800 of those received last year. By the end of this financial year they expect to have had more than 4,000 complaints.
According to the OFT, there are over 20 million PPI policies in the UK in an industry with revenues of more than £5 billion a year; that’s three times the value that banks make in bank penalty charges.
But a recent survey by the Financial Services Authority (FSA) of 150 firms selling PPI, found that while most lenders were now telling customers PPI was optional some firms were still guilty of serious failures in the way they sold the insurance, including not giving clear information about the cost and not telling customers what they would be covered for. Four large firms are currently reviewing their PPI sales according to the FSA. The FSA’s concerns are now also being backed by the Financial Ombudsman Service.
Boorman continued: “It’s something that the FSA has expressed considerable concern about, and in the cases that we see in the Ombudsman we see too much evidence of bad practice too.
“We’ve seen complaints doubling, trebling, coming to the Ombudsman Service. It’s our biggest single cause of customer concern about insurance. I can well understand why customers are concerned because we’ve been upholding very large proportions of those cases.
"It’s now more or less two thirds of the complaints that we see worth having to say to the bank, to the insurance company ‘no you got this wrong.’ Let’s get it right for the customer. That’s definitely much higher than normal. It’s about twice our normal rate.”
Alan Blacker, an industry insider who used to be a senior manager for one of the country’s leading high street banks, said that in the past the bank he worked for had sold PPI without people realising: “The main problem with PPI is it’s dealt with as part of the finance package as a whole. So the customer is never told they are buying PPI. In fact, when I worked at the bank I was told the less said the better. And that’s the main problem for consumers.
"If you are taking out car insurance, or house insurance you know precisely what you are buying, you can discuss what you want with your supplier and they can make that available to you at a price you agree. With PPI, it’s completely silent. You are told it’s part of the deal and so when you take out your loan for £100 a week you are told it is fully protected. You have no idea that it’s costing you £30, £40 a month for the actual insurance.”
One of the individual situations highlighted in the programme is that of Samantha Dunn from Waterlooville. She got a series of consolidation loans totalling £10,000 from HSBC. But as she tells Tonight, the branch staff were also keen to sell her payment protection insurance to go with it.
“When I went to top up my loan the branch staff on every occasion very keen to emphasise that this was the way to go. And that to completely and utterly protect my loan repayments, they almost insisted that is what I had to do.
She won a PPI payout of £1,600 two weeks ago, saying: “After sending my initial letter off to the bank requesting they investigate my PPI on my previous loans, within six weeks I’d had a refund with interest into my bank account. It was fantastic!”
HSBC told Tonight there is no evidence that Samantha Dunn was mis-sold her payment protection insurance and that it refunded payments because the records it keeps to ensure correct sales procedures are followed were incomplete.
The British Banking Association (BBA) told Tonight: “Payment Protection policies offer consumers valuable peace of mind and have helped hundreds of thousands of people meet their repayments when their circumstances have changed. It is made clear to customers that the product is optional and this has been recognised by the Financial Services Authority.”
Fronted by Martin Lewis of MoneySavingExpert.com, "Payback Time: Tonight" airs at 8pm this evening on ITV1.
