Dear sir
I’ve recently read an article on the BBC website indicating that around 10 lenders will be fined for mis-selling Payment Protection Insurance. Alongside this I’ve read the article about reducing the size of KFI documents. With these and a general view of the mortgage market, isn’t it really about time that the FSA radically overhauled the financial services market fully?
The whole point of the market is that it is a sales market. Despite regulation it is so lucrative that there will always be sales people looking for loopholes and justifications for having made their sales. These sales people will be egged on by the lenders regardless of rules on inducements.
The lenders will be looking to reward sales that come their way, and will constantly compete to ensure more sales do so.
Note I’ve not used the word adviser yet. This is a fair term for the many independent brokers, but not for most, and certainly not for the lenders own sales people. Many brokers will find that there will be a small selection of lenders that come to the fore time and time again that are the best deals.
Most likely, best by way of commission, (sorry, procuration fees), but this can usually be justified some other way to ensure that no awkward questions may be asked. Advise... no, just the selection of closest fit.
I now work for a lender where I am targeted on the insurance ancillary sales. I have a strike rate for each of PPI, Life, and Home insurance.
However, I am supposedly an advisor. I have to justify the sales, and only sell where there is a need. Then come the advice compliance team who check my sales, as I am now used to their process I should be recommending all of these insurances for every case. Even if a customer has one of these insurances already, unless I see physical evidence that it is better cover, I should recommend ours as being “most appropriate”.
Even when a customer “refuses to discuss”, I am told I should still recommend our cover as there is still a risk. At the end of the day I am covering our company against any regulated complaint. This may be so, but I’m not comfortable with the “advice” I’m giving.
Is it any wonder mis-selling is rife.
How about this change then?
Well, why don't we look at a similarly regulated industry, say the legal industry?
The actual solicitors are left to get on with their jobs, ensuring they do it correctly. The firms then have to chase the business separately, using marketing, Business development teams etc. I think the FSA couldn't do a lot worse than to consider this model. Mis-selling should become a thing of the past, mortgage advisors could then focus on giving their customers the correct service without pressure of adding on this and that. It should be agreed at outset between the customer and the firm as to what advice they wish to receive. If they do not wish to discuss an aspect, it should not be seen as a risk and a recommendation made regardless.
Why won’t the FSA do anything about this? As I mentioned earlier, the market is lucrative, why would they want to upset the economy. After all, what is a million pound fine compared to the annual billions most lenders make each year.
James Alexander, PPI Focus
Dear sir
The FSA has now spelled out its concerns about payment protection insurance and announced one of its largest ever thematic reviews of this particular market sector (see “FSA outlines details of next PPI investigation”, MI issue dated 13 Jan page 5). It’s now time for mortgages advisers who sell mortgage payment protection insurance (MPPI) to take immediate action to protect themselves from the possibility of mis-selling this product.
Key points set out in the FSA’s press release of 11 January must be covered in all PPI sales and then fully documented on case files. These are: making it clear to customers that PPI is optional; giving correct product and price information; explaining eligibility and exclusion issues; recommending a policy that meets customer needs; ensuring that a fair refund on cancellation is included in any recommended product. FSA enforcement action and large fines have already shown that mortgage firms are certainly not above criticism when it comes to PPI sales – so let’s make sure that we are fit for the FSA’s pending thematic review to minimise the risk of future enforcements and fines.
It is ironic that during the days of “voluntary” regulation under the Mortgage Code, the government (through the MCCB) started an initiative to promote PPI because, at that time, the proportion of take up of PPI was very low and needed to be raised to protect more borrowers. In response to this the MCCB made it compulsory that the mortgage customer must be offered PPI and if they did not want it the intermediary had to get the customer to sign a disclaimer. We have retained this in our system as we regard it as best practice. It’s worthy of note that in at least two cases this has saved our customers’ bacon when a complaint has been made under the FSA regulation regime.
Clearly, the only failsafe way to ensure completion and documentation of all of the stipulated FSA actions throughout the PPI advice and sales process, plus any additional measures such as the above customer disclaimer, is to use an effective sales and compliance system such as Home Buyer.
Richard Angliss, Managing Director, Home Buyer Systems Ltd.
Building bridges
Dear sir
The new Home Information Pack (HIP) regulations are imminent and the government is aware of what it must do but its track record is not good when it comes to instilling consumer/public confidence. What must not be overlooked however is that not only is its track record poor but so is ours. The house buying industry has a poor track record of generating consumer confidence and we must not leave it to the government. We have been shooting ourselves in the foot for twelve months now with all the infighting between the professions with vested interest and now is the time for the industry to accept 1/6/07 and whilst acknowledging the competitive opportunities it should at least come together in a united front to try and court our future clients – the currently mainly ignorant consumer – and convince them that we still have their vested interest at heart despite perhaps our reluctance to support the regulatatory changes.
Alan Dring, sales director, eConveyancer
Education is key
Dear sir
I believe government is going to have to do a serious amount of public education before this summer. Not only in respect of the arrival of HIPs but also the ban on smoking in public places. The two could be encapsulated into one public awareness ad campaign – to save taxpayers’ money. I’m sure MI readers could devise a suitable scenario for the ads?
Unless our estate agent friends could confirm to the contrary, there hasn’t been the anticipated rush by sellers to beat the deadline, nor has that been neutralised by the base rate rises? I suspect not and that the real reason it’s not yet happened, is because Joe Public doesn’t yet know about HIPs.
Name and address supplied
