Lloyds stops selling PPI policies
New customers with Lloyds Banking Group will not be ripped off by the sale of payment protection insurance (PPI) alongside loans, mortgages and credit cards after the high street bank announced it would stop pushing the product.
The first of the banks to take this step, Lloyds said as of 23 of July its Lloyds TSB, Halifax, Bank of Scotland, Cheltenham & Gloucester and Black Horse brands had stopped selling PPI.
Instead, brands that fall under the Lloyds umbrella will hand out leaflets on PPI put together by the British Bankers' Association.
PPI is a product designed to help customers with borrowing repayments if they should fall ill, or made redundant and unable to work.
The practice of selling PPI to a customer when they are taking out a new product has come under considerable fire by regulators because of the product's many exclusions and the way it has been pushed.
Individuals who currently have PPI policies alongside Lloyds products will not be affected by the changes and the bank has assured customers it will not raise credit card and loan rates to pay for the loss of revenue it is likely to suffer.
Peter Vicary-Smith, chief executive of consumer watchdog Which?, says: "Lloyds' decision to stop selling PPI is a huge victory for consumers. Hopefully other banks will follow suit and we'll finally see the back of this poor protection product. Now is the beginning of the end for PPI."
What next for PPI?
Over the past five years there have been investigations by the Office of Fair Trading, the Financial Services Authority and the Competition Commission into the sale of PPI. And almost one third of the complaints received by the Financial Ombudsman Service last year were in relation to 'mis-selling' of the product.
In May this year the Competition Commission ruled it would continue in its attempts to achieve an outright ban of offering PPI at the point of sale.
Now Lloyds has thrown its considerable weight behind the issue, it is likely such attempts will be more successful.
A spokesperson for the banking group said: "This move reflects the uncertainty around the regulation of PPI sales and processes. The group believes further changes in regulation will make it uneconomic to continue to offer these products in their current form."
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
The practice of a dishonest salesperson misrepresenting or misleading an investor about the characteristics of a product or service. For example, selling a person with no dependants a whole-of-life policy. There have been notable mis-selling scandals in the past, including endowment policies tied to mortgages, employees persuaded to leave final salary pensions in favour of money purchase pensions (which paid large commissions to salespeople) and payment protection insurance. There is no legal definition of mis-selling; rather the Financial Services Authority (FSA) issues clarifying guidelines and hopes companies comply with them.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.