Huge profits spark fury at rip-off loans
DAILY EXPRESS - 10TH MARCH 2004
Millions of Britons are being duped into buying rip-off insurance policies because regulators have failed to curb lenders’ unscrupulous sales tactics.
Leading banks continue to make vast profits by mis-selling payment protection insurance for personal loans and mortgages, despite pressure from consumer groups and MP’s.
Last night, the Consumers’ Association said it would begin campaigning for the Government to take action over the way lenders sell the policies, amid accusations the system of voluntary regulation, run by the GISC has failed.
Liberal Democrat MP Norman Lamb, of the influential Treasury Select Committee, said, “There is clear evidence of seriously excessive profits being made in the sale of these policies. The GISC ought to respond to what has been exposed.”
Simon Burgess, managing director of broker and GISC member Burgesses, said “The GISC has categorically failed in its duties”.
Burgess said lenders were making up to £10million a day through their insurance subsidiaries.”
The CA warned commission on payment protection insurance premiums was typically in excess of 25%. Such cover helps borrowers meet monthly loan repayments should they lose their regular income. But independent studies show sales staff at leading loan providers routinely including insurance premiums in repayment quotations without telling customers or even asking if cover is required.
Lenders also fail to check on borrowers’ suitability for such cover and they do not explain the policies are optional. CA research in 2002 found “shocking” evidence of mis-selling details of which were passed to the GISC.
A CA spokesman said, “We are sure companies still mis-sell this cover. These practices are widespread because lenders make so much money out of the policies.”
A GISC spokesman said “We are sure companies still mis-sell this cover. These practices are widespread because lenders make so much money out of the policies.”
A GISC official said. “If any of our members have breached our standards, we want to know about it. We would look at ways of making sure they were brought into compliance.” She was unable to say what action had been taken after the CA’s report or whether it had been effective.
The CA has urged the Government to intervene in the payment protection insurance market in the new Consumer Credit Bill. It wants lenders banned from automatically including insurance in loan quotes and to be forced to tell customers such policies are optional.
“We wouldn’t tell people never to buy this sort of insurance,” said the CA spokesman. “But consumers should be very clear what they are paying for. Most policies have a lot of exclusions, so borrowers should shop around for the best deal.
