David Quick, managing director at CETA commented following the launch of the Office of Fair Trading investigation into the sale of payment protection insurance (PPI).
He urged the OFT and the Financial Services Authority to launch a consumer education campaign and to clamp down on banks and building societies by bringing in severe penalties for mis-selling.
“As everybody in the industry knows, they have been ripping the public off for far too many years,” he says.
Payment protection insurance is designed to protect a borrower’s ability to keep up payments on a loan in case of accident, sickness or unemployment.
David Quick said it is vital to draw a distinction between sales of mortgage payment protection insurance (MPPI) and other forms of PPI.
“The press and the FSA have unfairly lumped together MPPI and PPI,” he says. “This has led to a big downturn in the take-up of MPPI which could have serious repercussions in the future, perhaps even leading to more home repossessions.”
He says the market place for MPPI is already highly competitive and the OFT should advise consumers to shop around and use the services of mortgage brokers who are regulated by the FSA and have access to a broad range of products.
He believes the main area of consumer abuse is single premium policies where the customer is sold a three to five-year payment protection policy with the premium loaded onto the loan at the beginning.
“The customer is not only then paying high levels of premium but is also paying interest on the premiums as well,” he says. “Over the last three years I have been saying that single premium payment protection policies should be banned. Now is the time.”
