Creditor insurance saga continues

by Will Ashworth07 Oct 2015
The UK’s Financial Conduct Authority (FCA) has now announced it will consider attaching a deadline to the thousands of payment protection insurance (PPI) complaints that have been rolling in since the current guidelines were implemented in December 2010.

"Overall, we take the view that a deadline and communications campaign would help bring finality and certainty in a way that advances the FCA's operational objectives of securing an appropriate degree of protection for consumers and protecting and enhancing the integrity of the UK financial system," said the FCA in a statement released last week.

The FCA intends to make a decision on the deadline by the end of this year. If it sticks to its current plan consumers in the UK would have until the spring of 2018 to make a complaint.

As a result of the current guidelines more than 10 million consumers in the UK have been compensated to the tune of $40 billion for being mis-sold this type of insurance by banks and mortgage brokers.

The downside of the entire process, however, is that many disturbing trends have cropped up as a result of this huge financial redressing of consumers wronged by aggressive salespeople.

A big drawback of this process is the huge number of complaints been received by the FCA that did not involve PPI insurance. In many cases the memories of complainants has faded badly making the evidence less than air tight. With cases dating back to the 1990s, the FCA has determined that a finite period of time in which to make a complaint probably makes sense given the amount of compensation already paid out to consumers.

Here in Canada the argument against mortgage insurance has been raised many times by consumer and investor advocates. Rob Carrick of the Globe and Mail calls it a “junk product” that often doesn’t payout.

"Banks are hyperaggressive in selling this junk product, and some mortgage brokers are getting into the act," Carrick wrote last December in the Globe and Mail.

See more: Mortgage life insurance labelled “junk product”

COMMENTS

  • by Andrewski 2015-10-07 1:06:05 PM

    Once again it is a case of caveat emptor. Canadian banks have done a fantastic job of "building fences" around their clients, yet the bottom line is most consumers research their next cell phone or TV purchase, while doing zero due diligence when it comes to most if not all of their insurance needs, let alone if consumers even purchase insurance. Financial literacy amongst most consumers is sadly severely lacking.

  • by 2015-10-07 11:51:59 PM

    Is the issue that banks are being held out that their sales techniques are in the rhelm of tied selling giving the customers the impression that the coverage is NOT optional of is the issue that the creditor insurance is not portable?