FSA to Review Consumer Loan Insurance Complaints

Mon, 05 Oct 2009

The Financial Services Authority (FSA) is to review payment protection insurance (PPI) claims made since June 2007. Consumers who were mis-sold the insurance on credit cards, mortgages or personal loans could now receive hundreds or even thousands of pounds in compensation, even if their complaints have already been dismissed. The news follows the publication of new guidelines from the FSA demanding PPI complaints are fairly handled and redressed. The guidelines include as many as 185,000 complaints which have previously been rejected.

PPI was sold by lenders as a form of cover should the borrower fall ill or be made redundant . However, the security of keeping up to date with payments even if borrowers were unable to work came at a cost, with lenders selling the insurance at inflated rates and without informing the consumer that they could purchase the insurance elsewhere. Some consumers have complained of being pressured into buying the insurance, while others claim they were not made aware the insurance was included in their credit agreement.

The ban on lenders selling PPI alongside loans has, however, contributed to a rise in interest rates on personal loans . With lenders no longer receiving the chunky PPI fee, they have begun to widen margins on interest rates .
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