Watchdog reins in loan sellers
SUNDAY EXPRESS - 15TH JULY 2007
The City watchdog has forced lenders to stop duping customers into taking out overpriced repayment insurance when they sign up to loans via the internet.
Many lenders, including high street banks, offer loans on their websites where payment protection insurance - the subject of fierce criticism for being frequently overpriced and ineffective - is automatically included.
The Financial Services Authority (FSA) warned this sales technique could lead to consumers buying payment protection insurance without knowingly doing so.
It says firms have now agreed to abandon this way of selling the cover and change application forms so consumers have to deliberately choose to buy the insurance.
But Simon Burgess at broking firm British Insurance blasted the FSA for dragging its heels in taking action. "Which? did research into this months ago, detailing how consumers obtaining loans over the phone or internet were being tricked into buying payment protection insurance cover.
"Well-known online providers, such as Lloyds TSB, Natwest and Tesco, were named and shamed then, so why has it been left until now to castigate them?
"Although I welcome any intervention to reduce payment protection insurance mis-selling, this really is too little too late."
Payment protection insurance covers repayments on a loan if the holder loses their job or is unable to work due to an accident or sickness. It is also offered to credit card holders and mortgage applicants. Adding payment protection insurance can double the cost of a loan, according to recent figures, and policies are often riddled with exclusions which means many never pay out.
Burgess added: "It is vital that organisations involved in the policing of payment protection insurance sales act swiftly and assertively to tackle the issues of unfair sales tactics, high commission rates, price differences and product variations. Until they do, consumers will continue to suffer."
Teresa Fritz from consumer group Which? said: "This is long overdue but it is good news. We want to see the regulator giving a strong message to the industry that tactics to bag commission on payment protection insurance sales will not be tolerated."
Vernon Everitt at the FSA said: "We have made payment protection insurance a top priority and are pleased firms have agreed to change the way they sell payment protection insurance over the internet. Many customers are focused on getting the loan, but it is just as important that they also think about whether they want to take out payment protection insurance cover."
The FSA is due to report on payment protection insurance sales standards in September. The Competition Commission review of payment protection insurance will be published later this year.
