Problems with payment protection insurance sales procedure at Nationwide
MORTGAGE FINANCE GAZETTE - 1ST SEPTEMBER 2007
Nationwide has pulled out of the loan and credit card payment protection insurance market because staff selling the products are not up to the job. This is a sad indictment of one of the country’s largest financial providers and the decision to withdraw all of its products in this area highlights the scale of the problem it has uncovered.
Given the focus that has been on the payment protection insurance market over recent years, the first question to raise must be why on earth Nationwide has not been able to train its stuff sufficiently well to sell payment protection insurance, without giving customers poor advice and putting them at risk of buying inappropriate products.
Nationwide has refused to comment on exactly where the problems lie, although the fact that all staff selling these payment protection insurance products are to be retrained is a clear indication that the issues involved relate to fundamental flaws in the processes and procedures currently being used.
The next question that Nationwide needs to deal with is how many customers have been affected by the poor selling procedures. The building society discovered there was a problem while carrying out a mystery shopping exercise and is now in the process of going through a sample of cases to determine how many people may have been affected.
Clearly Nationwide is hoping not to have to revisit every credit card and loan payment protection insurance sale made over the recent past, but if there is a possibility that customers my have been treated unfairly and been sold insurance that is inappropriate, this is exactly what they should do.
It will be interesting to see how the Financial Services Authority (FSA) deals with the situation, and although the problem was discovered by in-house checks and Nationwide is taking remedial action, it will be keen to work closely with the regulator and avoid being forced into taking further action at a later date. Hopefully the two parties are therefore in close contact to ensure the quickest and most effective resolution for the customers involved.
Given the problems that have been uncovered in the sale of credit card and loan payment protection insurance, consumers competitors and regulators will also want to know that a thorough investigation has been carried out in other similar product areas such as mortgage payment protection insurance. At the moment the building society insists there are no problems in its sale of mortgage payment protection insurance, and if this is the case then it must be able to demonstrate clearly why. If there is any crossover between staff selling credit card and loan payment protection insurance, with those selling mortgage payment protection insurance then many will be justifiably worried that the publicised problems actually go further than currently stated.
Nationwide has already been fined the best part of £1million by the FSA this year for a lack of financial controls over its information security risks. Hopefully the problems uncovered in its payment protection insurance sales will be dealt with quickly and effectively to avoid problems for consumers and further embarrassment for Nationwide and the payment protection insurance sector as a whole.
