The Council of Mortgage Lenders (CML) welcomed the Financial Services Authority's (FSA) second phase report on PPI. The second phase did not include prime mortgage payment protection insurance, as the FSA uncovered few compliance failures in this sector during the first phase of its investigation. But the CML was surprised OFT has nevertheless decided to include mortgage payment protection insurance (MPPI) in its proposed referral to the Competition Commission.
Michael Coogan, CML director-general, commented: "It is surprising that the OFT has decided to include prime MPPI in its proposed referral to the Competition Commission, given that its market study points out differences in terms of greater access to stand-alone cover than in other PPI sectors. However, we will naturally examine the OFT's reasoning in more detail before responding formally.
"The work we have done on prime mortgage payment protection insurance clearly demonstrates that it is possible to create a credible product with a compliant sales process. We hope that mortgage borrowers who need MPPI are not put off taking it because of more general concerns about the wider PPI sector."
CETA has welcomed the referral of PPI to the Competition Commission. David Quick, managing director of CETA, said: “I think the OFT is spot on in its findings, it’s just a shame that it is all taking so long. But why would the major providers of PPI want to hurry through change when they are making so much money out of the current situation? It is in their interest to string the process of change out as long as possible.
“I hope the OFT and the FSA make it plain that the main problem is with PPI and not MPPI or we will see a further decline in the sales of MPPI which will put mortgage holders at risk in the future.”
Andrew Hagger, head of news and press for moneyfacts.co.uk said PPI misery was not over yet: “Whilst it must be seen as a positive step that the OFT intends to refer the UK payment protection to the Competition Commission, it is likely to be many months before changes are introduced to give the consumer a fairer deal.
“To save customers having to pay ‘over the odds’ by purchasing this cover from their lender at the ‘point of sale’, it needs to be made clear that similar cover is available from standalone providers with the following benefits:
- No interest is payable on your premiums
- You don’t have to pay the total premium up front
- If you cancel the policy early, you are not penalised by the premium rebate calculation used by lenders.
“The likes of Paymentcare.co.uk and BritishInsurance.com offer similar cover to mainstream lenders at a much reduced cost to the customer, without charging interest on top, or hitting them further in the pocket with poor value rebates on cancellation.
“Whilst these standalone providers offer far greater value for money, they are hampered by the fact they don’t have the massive benefit of ‘point of sale’ presence and that very few people are still aware that they exist.
“I’m hopeful that the Competition Commission will take action to ensure the consumer obtains better value for money, but this is not going to happen overnight. In the meantime many customers are still going to be getting a poor deal from their lender.”
Paymentshield expressed its disappointment with the OFT review. Graham Boulger, group commercial director, Paymentshield, said: “We are disappointed that the PPI investigation has failed to pick up the way that the vast majority of the mortgage intermediary market works in selling regular premium MPPI. The investigation draws no distinction between the way that single premium PPI is sold on loans and the way that MPPI is advised and sold on mortgages.
“It is really disappointing for trusted mortgage advisers who give their clients good advice and shop around for the best policies when they are selling MPPI. We welcome the fact that this is being referred to the Competition Commission who will hopefully be able to see that mortgage advisers behave entirely differently than the PPI distributors in offering value and choice for consumers in a competitive marketplace.”
