Lenders come under fire
INVESTORS CHRONICLE - 24TH OCTOBER 2003
A recent survey of sellers of mortgage payment protection insurance policies has uncovered shockingly low standards at the lenders who sell them. The policies cover the holders of illness and unemployment.
The Mortgage Advisers Association (MAA) found lenders failed to ensure that th epolicy sold was suitable for the buyer, and frequently did not explain what was covered and what was not. Callers were not aksed about their medical history, or told that pre-existing medical conditions would not be covered.these exclusions are a major reason why claims are rejected and lenders are required to warn clients of this. The MAA also found that companies were reluctant to send out policy documents.
One of the lenders surveyed was Barclays Bank, which was in hot water for another reason this week. Its boss thinks credit cards should be avoided at all costs because they are an expensive way of borrowing. Barclays is one of the UK’s top lenders, and also one of its biggest and most profitable providers of credit cards. Matthew Barrett, Barclay’s chief executive oficer, is quite right, of course. If you have to borrow, never do it on a credit card with a high annual percentage rate (APR).
Consumers would be well-advised to steer clear of dozens of other financial services products. In many cases, products churned out by the industry are quite the opposite of what we need. And when the product approaches something that we do need, it’s often horrendousbly expensive or the plan or fund offered is of poor quality.
Mis-selling is rife: think personal pensions, equity-release schemes, endowment policies, split-capital investment trusts, whole-of-life insurance, precipice bonds or even Marks & Spencer sending out thousands of unrequested credit ards. There are dozen of actively managed funds with high fees that are nothing more than tracker funds, while with-profits funds can easily be replicated for better value by investors themselves.
The Financial Services Authority is contemplating an education programme in personal finance for the masses, but the first simple lesson it needs to teach is that the financial services industry has never been run for the benefit of its customers – and it never will be.
