The Competition Commission is finally looking to get its teeth into the con trick of payment protection insurance (PPI), as it issued a statement yesterday calling for a ban on sales of the policies when people take out loans and credit cards.
The Commission wants banks to wait for 14 days before approaching borrowers to sell PPI, and wants to ban financial providers increasing interest paid by charging for the entire cost of a policy at the start of a loan.
Martin Lewis, the personal finance campaigner, estimates that half of the policies in force may have been mis-sold (estimated to be worth £10BN).
Needless to say the Association of British Insurers isn't best pleased, and claimed that the Commission would "kill the PPI market".
So what?
The policies rarely pay out (the Competition Commission said only 14% of premiums are returned to policyholders, compared with 54% for home insurance and 78% for car insurance) so what is the point of them?
Showing posts with label competition commission. Show all posts
Showing posts with label competition commission. Show all posts
Friday, November 14, 2008
Thursday, June 05, 2008
PPI Slammed
The Competition Commission has slammed the £5.4BN payment protection insurance (PPI) industry in a report issued this morning.
The Competition Commission states that consumers are paying more than £1.4BN a year too much for PPI; it also noted that banks, mortgage and credit card providers made it difficult for customers to compare PPI policies or switch to change their insurance.
Up to 7.5 million policies are taken out every year, with about 14 million policies active at any one time.
Peter Davis, deputy chairman of the commission, is quoted in The Times:
"We've found serious problems with the PPI market and customers are paying for the lack of competition. The way PPI is sold as an add-on to a loan or other credit product means that distributors escape the pressure they should face from competing suppliers".
Mr Davis has recommended a ban on selling PPI at the same time as a loan, or even within a fixed time after the loan, is taken out.
This is yet another nail in the coffin of the reputation of Britain's beleaguered financial services industry.
The Competition Commission states that consumers are paying more than £1.4BN a year too much for PPI; it also noted that banks, mortgage and credit card providers made it difficult for customers to compare PPI policies or switch to change their insurance.
Up to 7.5 million policies are taken out every year, with about 14 million policies active at any one time.
Peter Davis, deputy chairman of the commission, is quoted in The Times:
"We've found serious problems with the PPI market and customers are paying for the lack of competition. The way PPI is sold as an add-on to a loan or other credit product means that distributors escape the pressure they should face from competing suppliers".
Mr Davis has recommended a ban on selling PPI at the same time as a loan, or even within a fixed time after the loan, is taken out.
This is yet another nail in the coffin of the reputation of Britain's beleaguered financial services industry.
Friday, December 01, 2006
New Rules For Home Credit
The Competition Commission yesterday unveiled a number of measures, designed to increase competition and lower prices in the home credit market. It did not impose price caps on home credit lenders.
The new measures force lenders to share data on their customers' payment records, and require them to publish their prices on a website so that borrowers can make more informed choices.
Home credit lenders, which include Provident Financial PLC and Cattles PLC, will also be obliged to give rebates to customers who repay their loans early.
However, the competition watchdog said that it had no plans to impose a ceiling on the repayment rates that lenders can charge. It argued that a rate cap might make home credit unavailable to the most vulnerable customers.
Competition Commission chairman, Peter Freeman, said:
"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices."
Provident Financial said that it would "work constructively" with the Commission to implement the new measures.
Quote:
"Provident Financial is pleased that the CC's own research confirms high levels of satisfaction among customers who find home credit products well suited to their needs."
Damon Gibbons, chair of campaign group Debt On Our Doorstep, said:
"The measures proposed in this report will probably take a further 18 months to impact on the price of credit.
In that time, lenders will have made another £100M in excess profits. Low income borrowers will wonder why it is that the industry isn't being forced to pay that amount as a levy to fund affordable credit provision such as credit unions, or why interest rates aren't being reduced through a cap immediately to ensure they get a fair price.."
The financial services industry is much like a balloon filled with water, when it is squeezed by rules and regulations in one direction it produces a "swelling" of new charges and fees in another.
The new measures force lenders to share data on their customers' payment records, and require them to publish their prices on a website so that borrowers can make more informed choices.
Home credit lenders, which include Provident Financial PLC and Cattles PLC, will also be obliged to give rebates to customers who repay their loans early.
However, the competition watchdog said that it had no plans to impose a ceiling on the repayment rates that lenders can charge. It argued that a rate cap might make home credit unavailable to the most vulnerable customers.
Competition Commission chairman, Peter Freeman, said:
"These measures are designed to open up the market to greater competition so that customers will get more choice and lower prices."
Provident Financial said that it would "work constructively" with the Commission to implement the new measures.
Quote:
"Provident Financial is pleased that the CC's own research confirms high levels of satisfaction among customers who find home credit products well suited to their needs."
Damon Gibbons, chair of campaign group Debt On Our Doorstep, said:
"The measures proposed in this report will probably take a further 18 months to impact on the price of credit.
In that time, lenders will have made another £100M in excess profits. Low income borrowers will wonder why it is that the industry isn't being forced to pay that amount as a levy to fund affordable credit provision such as credit unions, or why interest rates aren't being reduced through a cap immediately to ensure they get a fair price.."
The financial services industry is much like a balloon filled with water, when it is squeezed by rules and regulations in one direction it produces a "swelling" of new charges and fees in another.
Wednesday, November 01, 2006
Banking Fees Still Opaque
Francis Chittenden, professor of small business finance at The University of Manchester Business School, says that regulations imposed on the small business banking market four years ago have failed to improve the transparency of fees and there is little point in new measures being imposed.
A report by Chittenden, said that in the last two years it had become more difficult for business owners to find out how much they would pay in charges and interest if they changed banks.
Chittenden claims that regulations imposed by the Competition Commission in 2002, to increase transparency and limit the dominance of four major banks, had failed.
Quote:
"The quality of information available has declined from two years ago. Despite regulations to make small business banking more transparent, the reverse seems to have been true."
Adding:
"I don't think governments are able to influence markets in the way they thought they could four or five years ago."
Chittenden estimated it now took a business owner three days to screen banks, negotiate with them and reach a conclusion on the best bank for them.
A report by Chittenden, said that in the last two years it had become more difficult for business owners to find out how much they would pay in charges and interest if they changed banks.
Chittenden claims that regulations imposed by the Competition Commission in 2002, to increase transparency and limit the dominance of four major banks, had failed.
Quote:
"The quality of information available has declined from two years ago. Despite regulations to make small business banking more transparent, the reverse seems to have been true."
Adding:
"I don't think governments are able to influence markets in the way they thought they could four or five years ago."
Chittenden estimated it now took a business owner three days to screen banks, negotiate with them and reach a conclusion on the best bank for them.
Friday, October 27, 2006
FSA Fines Credit Broker
The Financial Services Authority (FSA) has fined LOANS.CO.UK, a licensed credit broker, £450K for mis-selling Payment Protection Insurance (PPI).
Approximately 14,400 customers were sold policies that they may not have needed.
Last week the Office of Fair Trading (OFT) referred the PPI industry to the Competition Commission. The conclusion of a five month investigation by the OFT was that the sale of PPI policies offered a "poor deal and often less protection than [consumers] think".
PPI is worth around £5BN a year, so it should come as little surprise to learn that some companies sell these rather dubious products in an "aggressive" manner.
In theory the insurance is meant to provide people with protection, if they fall ill or lose their jobs. The FSA was critical of the way that Loans.co.uk had been selling, usually over the telephone. It said that customers were not given enough information at the point of sale to make an informed choice.
One would have thought that the financial services industry had learned its lesson from the endowment mortgage scandal of the 80's and 90's. Unfortunately not, despite its reputation being in tatters, it seems that the financial services industry is determined to make money no matter what the cost to the poor saps that it dupes and its own reputation.
Approximately 14,400 customers were sold policies that they may not have needed.
Last week the Office of Fair Trading (OFT) referred the PPI industry to the Competition Commission. The conclusion of a five month investigation by the OFT was that the sale of PPI policies offered a "poor deal and often less protection than [consumers] think".
PPI is worth around £5BN a year, so it should come as little surprise to learn that some companies sell these rather dubious products in an "aggressive" manner.
In theory the insurance is meant to provide people with protection, if they fall ill or lose their jobs. The FSA was critical of the way that Loans.co.uk had been selling, usually over the telephone. It said that customers were not given enough information at the point of sale to make an informed choice.
One would have thought that the financial services industry had learned its lesson from the endowment mortgage scandal of the 80's and 90's. Unfortunately not, despite its reputation being in tatters, it seems that the financial services industry is determined to make money no matter what the cost to the poor saps that it dupes and its own reputation.
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