One of the greatest comedy films of the last decade or so is Groundhog Day. This is a fact and anyone who disagrees is going to have to face me and Punxsutawney Phil in a fight to the death. Or at least until Phil gets tired.
For those who have been in hibernation since the film’s release in 1993, Groundhog Day stars Bill Murray as weatherman Phil Connors who visits Punxsutawney to cover the annual ‘Groundhog’ event. Here, tradition dictates that on this day, the groundhog comes out of his long Winter sleep to look for his shadow; if he sees it, there will be six more weeks of bad weather and he returns to his hole. If he doesn’t see it, Winter is deemed over. Following his piece on the Groundhog celebrations, Connors becomes trapped in Punxsutawney and ends up repeating the same day over and over again.
A voyage of self-discovery
This film though is a voyage of self-discovery. At the beginning Connors is a misanthrope, despising everyone and everything. Essentially he doesn’t understand the community he finds himself in and has no idea what an opportunity he has been presented with. Having tried to extricate himself from the situation by any means possible, Connors learns not only to understand the value of friendship but also where he fits into the great scheme of things. Self-enlightenment and understanding are his true salvation and eventually free him from ‘Groundhog’ perpetuity.
So, I hear you ask, what the hell does all this have to do with mortgages? Well, a couple of weeks ago, I experienced my very own Groundhog Day when the Office of Fair Trading (OFT) announced that it had referred the payment protection insurance (PPI) market to the Competition Commission for further investigation. It really is Groundhog Day because I’m writing about PPI again and the OFT’s reasons for making the referral had a distinctly ‘Groundhog’ feel to them.
The reason the ‘Groundhog’ metaphor is so apt in this situation is that on reading the OFT’s justification for its decision, I found myself going over the same arguments we had prepared for OFT on two separate occasions – firstly, when it published its interim report last Summer and secondly, when it announced its proposal to refer to the Competition Commission in October.
Warranted investigation
The OFT’s decision comes after a period of public consultation with its view being ‘that the competition concerns it identified prior to the consultation exercise remain valid’ and ‘an investigation by the Competition Commission is now warranted’. The OFT says it has based its decision ‘on evidence of features of the market that it suspects are preventing, restricting or distorting competition and thereby harming consumers’.
The OFT will make the reference under section 131 of the Enterprise Act 2002 for an investigation into the supply of all PPI services, except store card PPI. This means that the four other PPI markets identified by the OFT will be part of the referral: first-charge mortgage payment protection insurance (MPPI); second-charge mortgage or secured loan PPI; unsecured loan PPI (motor loans, hire purchase and catalogue purchases); and credit card PPI.
AMI responded on behalf of our members to all previous OFT PPI consultations and is disappointed, to say the least, to see that MPPI will also be part of the referral. A large part of AMI’s response to the OFT focused on the uniqueness of the MPPI market in relation to other PPI sectors and also the major role intermediaries play in research and sourcing the most suitable product for their client. Our belief is that the robust MPPI sales processes which have been adopted by mortgage intermediaries separates MPPI from other PPI markets.
A special case
The OFT admitted itself that MPPI is a ‘special case’ and ‘seems to operate slightly differently from the other PPI markets’. It also acknowledges the role of standalone providers and the role of brokers. It was therefore surprising to see the OFT’s decision to include MPPI and surprising that so little of various responses from other trade bodies and organisations was referenced in the final decision.
Indeed, OFT continues to cite ‘anecdotal evidence’ from sometimes as little as ‘one insurance firm’ to inform its referral, rather than rely on hard facts. For example, it says:
‘At least one insurance firm noted that many brokers act in a similar way to lenders – i.e. they do not offer customers a choice of PPI products. Responses to our consultation and anecdotal evidence from other stakeholder meetings corroborate this viewpoint.’
AMI conducted research on PPI at the end of last year. The findings revealed that 74 per cent of members offer PPI from more than one provider. We shared this research with the OFT and, considering that the Financial Services Authority should have the hard data on which providers broker firms use, we see no reason for there to be a reliance on anecdotal evidence.
It is a shame that the OFT went ‘Groundhog’ in its three reports and chose to ignore some of the most pertinent research and responses available. AMI will, of course, take a full part in the Competition Commission’s work and will continue to represent members’ interests and provide information on the compliant sale of PPI policies.
Rob Griffiths is associate director of the Association of Mortgage Intermediaries (AMI)
