Banks still getting fat on PPI...

You might remember a few months back that a number of lenders were accused of running a “protection racket” by the consumer watchdog Citizens Advice. It made an official “super complaint” to the Office of Fair Trading about the way lenders were selling, or mis-selling, payment protection insurance (PPI), the cover tacked on to loans.

Firms, including Capital One, were eventually fined for failing to explain the policy to customers clearly enough at the point of sale.

The controversy was re-ignited this week after an admission by Ulster Bank that it overcharged 25,000 customers who paid off their loans early, by continuing to charge them for the insurance.

Some people need PPI on their loans more than others. The same group, perhaps, who might pick up the phone at the behest of Carol Voderman and secure their family home against an enormous lump sum with a sky-high interest rate.

While PPI could be useful for a specific set of customers, however, lenders were accused of pushing it on anybody and everybody. And it seems that banks are still all-too keen to push PPI on any customer who is applying for a loan, whether they need it or not.

Last week I applied for a small loan from HSBC, and found the bank still a little too insistent about the benefits of cover.

I called before work and was transferred to HSBC’s Direct Financial Centre. The first five minutes of the call were spent going through the figures on a loan over twice the size I’d asked for, with PPI included.

“That sounds expensive,” I said. “That’s including protection, of course”, the telephonist helpfully pointed out, after I’d stared at my post-it covered in figures for a while, scratching my head.

“I don’t want protection, and I don’t need a loan for that much money. Can I apply for the amount I originally asked for, without protection”, I stated.

She was, apparently, “legally bound” to explain the importance of PPI – why I needed it and what would happen if I didn’t get it.

The hustle even continued. “Because we recommend you take out PPI, we’ll have to go through the whole loan application procedure and then opt out at the end,” I was informed.

After I put the phone down – having successfully obtained a loan without the attached insurance, I made a quick call to the BBA. “Banks are not legally bound to tell customers about PPI,” explained Stuart Dickey. “The legal requirement, according to the banking code, is actually the other way round! Banks should not insist that customers take out insurance with a loan”.

Posted by James Charles

Comments

[Peter]

I tape record important telephone calls so there can be no doubt about what was said. Where someone has cold-called me, and I inform them that the call is being recorded, most ring off!

[Bay]

I had to default on a loan. I informed the bank (Lloyds) beforehand, and they agreed to not accept repayments for 6 months.

Just ask properly and they'll agree.

Glad I didn't get the insurance.

[Football Credit Card]

A lot of banks are trained to offer loan quotes including the payment protection insurance. They dont offer the loan quote and sell the PPI seperately, they include it from the start and many consumers dont realise this. Some consumers even think its a free service provided with the loan deal.