11 May 2015
The mis-selling of PPI and the long term awarding of compensation is on everyone's mind and, as a news story, makes regular appearance in the media but, what has changed? What good has the scandal brought to the customer?
The mis-selling of PPI to thousands of customers over several years, highlighted several weaknesses in the financial industry, how it was regulated and how the banks conducted themselves. As a result, not only are customers claiming compensation from the banks, lenders and other financial institutions in the UK but there has been a concerted effort to put in place measure to prevent such a disaster from happening again.
Key points include:
The Financial Services Authority was the fore runner to the new and improved Financial Conduct Authority (FCA). Many financial experts at the time commented that the FCA "was the Financial Service Authority WITH teeth".
Previous to the FCA, only recommendations that things should be changed were ever given by the Financial Services Authority as they had no power to enforce decisions. The FCA now has the means to do so. Better regulationshouldprevent future issues and catastrophes form happening.
Not all PPI policies were sold as polices that were paid for monthly. Single premiums policies were sold to the customer, with the premium being one lump sum that was added to the loan. In this sense, this additional lump sum had interest added to it on a monthly basis and often made a loan unaffordable to customers who found, in only a few months, they were struggling to afford repayments.
These policies, like the other pay monthly type, were also not running for the entire length of the loan; some only covered the first half of the loan, leaving the remaining few years 'unprotected'.
In many cases, customers were sold PPI at the time that they took out a loan or credit card. Applying for finance is a decision motivated by emotion and, in many cases, desperation too. As a result, selling additional products at the same time has now been stopped.
Once you apply for a loan, you must be given at least 7 days before the bank or lender attempt to sell you anything else in addition, such as a PPI policy or any other kind of insurance policy. They also need to make is clear to you that you are under no obligation to buy it.
There are many other changes too such as, if you are advised to buy a certain policy or product, you need to have the reasons in writing.