Things are falling apart and PPI refunds remain unfair

Is it just me or are things getting worse? We are seeing weekly changes to fixed rates as lenders do headless chicken impressions every time the Bank of England tosses a coin over the base rate.

I receive emails kindly informing me that product ranges are being withdrawn and new ones introduced, only for everything to change again within the month.

Faxes and letters are being dealt with seven days after they were re-ceived, issues are being chased up after five days if at all and lenders are now working on cases they received weeks ago.

Lenders and packagers are using valuers who persistently downvalue properties just because they can. And when you complain or criticise the practice they demand you show comparables they know cannot be obtained.

Solicitors refuse to pay broker fees because they say it’s not part of their service but withdraw their own fees without compunction.

They also seem afraid to pick up the phone and call other solicitors to see if documents have arrived and if there’s anything else they need.

BDMs call you wanting to tell you how great the company they work for is and what fantastic products they have. Well, for this week at least. Next week could be different.

With all this going on, are things going to get better or will the whole mortgage industry implode in a nasty mess of incompetence and inefficiency? Watch this space.

And another thing. If consumer watchdog Which? gets confused about the level of refunds available from cancelled single premium protection policies, what chance does the man in the street have?

Reading through an article in May’s edition of Which? magazine, I stumbled across a sentence that led to a sharp intake of breath. In an article discussing what to look out for in the payment protection insurance market, it stated: “But if you have bought payment protection insurance, under new Financial Services Authority guidelines, you can now cancel single premium PPI and get a proportionate part of the refund.”

The article seems to be claiming that consumers will get a pro rata refund, but this is not the case. Indeed, it was this point that generated a great deal of frustration in the market when the FSA initially announced the deal it had struck with the single premium PPI industry earlier this year.

The agreement reached actually means providers have to “calculate the refund fairly, taking into account their reasonably incurred costs, which may or may not result in a pro rata refund”.

But what constitutes a reasonably incurred cost? Surely this leaves the door open for unscrupulous providers to drastically cut the scale of the re-funds they pay on cancelled policies.

Which? has played an important role in raising awareness about the problems seen in the PPI market and continues to offer excellent information and advice for consumers struggling to get good deals.

But the fact it can make a mistake in regard to single premium policy re-funds shows how effectively providers have muddied the waters and confused the issues for everybody.

The ongoing battle over bank char-ges is an indication of how large financial providers operate and the view they are likely to take when it comes to working out the reasonably incurred costs in cancelling policies.

The FSA undoubtedly missed an opportunity to fortify consumer trust and improve transparency in the single premium PPI market. It should have insisted on pro rata refunds for cancelled policies.

Instead, we have a situation where people think they are getting proportionate refunds, but in reality it is un-likely they will get anything of the sort by the time the providers have added up their own costs when settling the matter.

What is most depressing is that the clients most likely to be offered single premium policies are often the least financially sophisticated. In many of the sales being made, providers and brokers have abused their position of power. Now those looking to cancel cannot be assured of a fair deal when they do.

Simon Burgess
Managing director
By email