High time regulators cracked down on the PPI rogues

From Sara-Ann Burgess

If the payment protection insurance market has not woken up yet, then the alarm bells should be ringing so loudly that even Mr Van Winkle would struggle to get a good night’s rest.

In the past fortnight there have been a number of significant events which will hopefully act as precursors to serious change in how business is done in this sector.

Both the Financial Services Authority and the Office of Fair Trading have been highly critical of the PPI market, and deservedly so.

In making their announcements on the same day, one wonders if there was more than coincidence at work and certainly tighter collaboration between the regulatory bodies must be hoped for if the gaps and loopholes in regulation as it stands are to be truly closed off to offending parties.

What had concerned the regulators was the amount of criticism that had rained down upon the protection market for about a year, while little positive action seemed to have been taken to curb the worst of the practices that were being highlighted.

In the past two months, two firms have been fined by the FSA for mis- selling PPI and the 455,000 fine handed out to loans.co.uk sends out a clear message concerning the seriousness with which offences are regarded. It is also an indication of the kind of fines other firms may be in line for if they commit similar offences.

This action is welcome and should make other firms look more closely at their practices and procedures. But I hope the FSA does not make an easy target of brokers.

Of course, where intermediaries are at fault action must be taken, but providers in this market are also guilty of selling poor value products to a captive audience. The regulator must be firm in sticking to its Treating Customers Fairly principle and begin to take some sort of action against the worst offenders.

The OFT’s decision to refer the PPI market to the Competition Commission will have far-reaching implications and deliver changes to the market.

This is a step in the right direction. But the FSA should not wait for these changes. Rather it should start to bring providers into line in the same way it has shown itself capable of doing when it comes to distributors.

Protection insurance is a much needed and important financial product. The tighter it can be regulated and the more competition that can be brought to the market for it, the better the products will be for consumers in terms of price, value and design.

Sara-Ann Burgess
Director
Britishinsurance.com
By email