GISC attacked for ‘complicity in mortgage payment protection insurance profiteering scam’
THE FINANCIAL ADVISER - 15TH APRIL 2004
Vince Cable, the Liberal Democrats’ shadow chancellor, has accused brokers of charging excessive commissions on mortgage payment protection insurance amid a lack of competition.
He accused the General Insurance Standards Council, the body governing mortgage payment protection insurance of ignoring inflated commissions for sales.
Mr Cable said: “There is clearly a serious consumer scam operating in the payments protection insurance market. The big banks and a small number of specialist brokers are taking advantage of weak rules, which do not require disclosure of commissions, to charge outrageous premiums.”
He said that the average costs of payment protection insurance on a personal loan can double the total interest, and that lenders were making more than £10m a day in premiums.
Mr Cable went so far as to say that the GISC was complicit in the profiteering, taking 0.1 per cent of commissions from members firms.
The GISC, however, said that it had received few complaints regarding payment protection insurance and that there was a £100,000 cap on income from member firms. They confirmed that not all lenders were GISC members.
Rachel Maidment, a GISC spokeswoman, said: “Commission is higher when the intermediary is carrying out some of the work normally carried out by insurance companies.”
But Simon Burgess, managing director of Burgesses, the Braintree-based specialist payment protection insurance brokers, said: “You can see why GISC is more than happy to turn a blind eye to the rip-off charges sold by banks and building societies to unsuspecting customers.
“Any organisation that takes more than 50 per cent of a payment protection insurance client’s premium is profiteering.”
