PPI complaints set to rival endowment issue

Financial research company Defaqto has warned that complaints about the mis-selling of payment protection insurance (PPI) are likely to run into the tens of thousands and will rival the endowment mis-selling issue. The PPI market has been referred to the Competition Commission following an investigation by the Financial Services Authority.

However, as the regulators clamp down on PPI, this is likely to mean more cost to consumers. As lenders’ income and profits from PPI start to fall, lenders and insurers are likely to increase rates and charges for consumers on loans, credit cards and other products to compensate for the loss of income from PPI. This could include the imposition of compulsory bank charges.

According to a recent Defaqto report on PPI, many people do not know that they can shop around for PPI, and do not know where to find alternative PPI quotes. The report says: ‘it is quite possible that the annual rate of complaints will run into the high thousands and possibly even tens of thousands.’

The financial research company has urged the PPI to take urgent action to boost consumer confidence in PPI, as this is an important product for consumers when designed and sold properly. Defaqto has outlined an action plan for providers which includes selling stand alone PPI policies, focussing on the customer during the sales process, and standardising PPI terminology across the industry. Awareness of mis-selling is likely to grow with the FSA imposing fines for rule breaches and the Competition Commission enquiry due.

Defaqto’s Head of Insurance, Brian Brown, who wrote the report, said: ‘Consumers are becoming more aware of the all the problems starting to surface in the PPI market.  Forthcoming regulatory pressures from the likes of the Competition Commission and the FSA will bring PPI further into the limelight during this year.  We believe that there will be thousands more complaints about PPI over the next 12 months and if the PPI industry is to rebuild consumer confidence, it must act now. ‘