27/01/2011 by admin.

Brokers are reeling at the colossal increase in bills they are being asked to pay to the Financial Services Compensation Scheme (FSCS) by way of its interim levy - some fear they may even go out of business.

Brewin Dolphin expects to face a £6m bill from the Financial Services Compensation Scheme (FSCS) as it collects its interim levy, this compares to the £1m the discretionary management group paid last year.Rival private client investment manager Charles Stanley has also confirmed to Citywire that it would be contributing £2.6m towards the levy this time round, after receiving its latest invoice from the FSCS. Advisers are incensed at the mammoth increases of up to 780% in the bills they have received from the FSCS compared to its interim levy last year.The FSCS felt it needed to raise its levy across the board following Payment Protection Insurance (PPI) misselling and the high profile collapse of Keydata Investment Services and Wills & Co which left thousands of investors out of pocket.

FSCS confirmed it would raise a record £326m for its interim levy, due to the collapse of Keydata Investment Services, Wills & Co and other investment firms. £93m is to be raised from the investment intermediation sub-class, which includes advisers, with £233m to be raised from fund managers.The FSCS has implemented a radical shake-up of the way it calculates firms’ contributions to the levies it imposes, which changes the measure from the number of registered individuals at a firm to the amount of ‘eligible income’.However the FSCS has been accused of not making it clear to advisers how and when the charges would be imposed.The adviser community has been thrown into confusion with some of the giant rises in bills it has imposed, and left many with a nightmare scenario of facing a one-month deadline to pay bills that vastly exceed expectations.

Many brokers feel the vast rises are unjustified and that the FSA should take a large part of the blame for increased compensation claims for not adequately policing the sale of ppi claims for not properly monitoring rogue firms.

The cost of ppi claims means all brokers are facing massive fee increases which critics say proves the structure of the compensation scheme is totally flawed. The majority of good practioners in the industry are paying for the sins of the bad.

Many feel the FSA should have been far more vigilent in the first place on the types of product sold on the market.

Source: David Burrows. AOL Daily Finance

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23/01/2011 by admin.

This week sees the banks begin their High Court challenge over new rules on the way complaint about Payment Protection Insurance  (PPI) must be handled.

The British Bankers’ Association (BBA) is launching a Judicial Review against the Financial Services Authority and the Financial Ombudsman Service over new regulations that came into force in December.

The rules aim to ensure consumers are treated fairly, both when they buy payment protection insurance (PPI) and when they complain about being mis-sold the cover.To ensure people understand what they are buying, providers will have to talk potential customers through the key features of a policy, rather than just provide them with a document giving the information, as was previously the case.

They will also have to provide evidence to show that it was made clear to the customer that the cover was optional if it was taken out alongside credit.But the banks are unhappy that the rules will apply to ppi claims relating to PPI policies which were sold before the new regime was brought in.

The BBA said: “We believe the FSA is effectively creating a precedent which permits it to apply new rules to previous sales - even where those sales were regulated by other FSA rules.”It said the policy was like having a road with a speed limit of 30mph, which was later changed to 20mph, and deciding to hand out speeding tickets to people who drove at 30mph before the limit was reduced.

PPI covers debt repayments if the holder is unable to work due to an accident or illness or if they lose their job, but it has come in for heavy criticism after research found it had been mis-sold to many consumers who would never be able to claim on it while others felt pressurised into taking it out alongside a loan or credit card.

The cover is currently the single most complained about product to the Financial Ombudsman Service, with the group receiving nearly 2,600 ppi claims during the past week alone. It is also finding in favour of consumers in 86% of PPI cases, suggesting the banks are not handling the complaints properly.

Source: The Press Association

Posted in PPI News General, Financial Ombudsman | No Comments »

05/01/2011 by admin.

When taking out a loan, it always makes sense to prepare for the worst, however is the protection offered always a good deal?Compensation claims running into millions of pounds are set to follow the damning Competition Commission report on the insurance cover that can make personal loans far more expensive than borrowers often realise.

Although Payment Protection Insurance (PPI) is sometimes sold with store and credit cards and mortgages, the provisional 218-page provisional report from the Competition Commission (CC) focuses on its impact on personal loans.A number of households facing rising costs will arrange personal loans for many £1000’s payable over five years in the next few months – and pay way over the odds for PPI because they aren’t paying attention.PPI could lift their monthly repayments on a £10,000 loan from £200 to £250 if they accept a policy from the lender, instead of buying cheaper cover through an independent broker.

In a lot of instances the policyholders don’t even realise they have bought it.The CC report accuses High Street banks of making £39 excess profit on every £100 of business in the personal loans sector, and warns that consumers may be overcharged at least £100 each when they take PPI in their loan package.Consumer groups like Which have campaigned against PPI for nearly a decade and estimates as many as 2 million PPI policies were missold with personal loans in the last five years, often because buyers would have been unable to claim due to pre-existing health conditions or details in the small print. For instance stress and back pains are not covered in any PPI policies.

The vast majority of people buying PPI with a 10 year loan might also be unaware that PPI policies may only be effective for five years. In addition, they might not realise that the single premium for the policy, added to the loan, is incurring interest charges for years into the repayment period.

This form of insurance is certainly a huge profit for the major lenders as only 14% of PPI premium income goes back to policyholders making successful claims, as opposed to 54% for home insurance and 78% for motor insurance.The Competition Commission claims the 12 largest PPI providers enjoy a return on their equity of a staggering 490%.It says borrowers are in a captive market (worth £5.5bn a year) dominated in 2006 by Lloyds TSB, Barclays, HBOS, Royal Bank of Scotland and HSBC.

For their part the banks, claim loan rates would be far less attractive if their PPI income was slashed.Nationwide BS stopped selling PPI on personal loans and credit cards last August, and now only sells it with mortgages. Nationwide now refers customers to the FSA website for advice on protecting their finances against accident, sickness and unemployment.The Association of British Insurers (ABI) maintain quite rightly that PPI can be a useful defence against financial crises, if it’s bought at the right price.

1. Were you suffering from a pre-diagnosed medical condition that was not discussed
2. Was the cost of the policy explained to you and were you informed that you could buy it elsewhere, potentially at a cheaper price.
3. Were you led to believe that the cover was a condition of the loan
4. Were you aware that PPI was attached to your borrowing
5. Were you told that being unemployed, self employed or on a fixed term contract could make you ineligible for a payout
6. Did you feel pressured into signing for the cover on the day

With estimates in the region of 2 million missold policies over the last five years, many people are eligible to claim back thousands of pounds.There are hundreds of web sites offering advice on ppi claims, however taking professional advice is the best way forward. With many high street banks putting ppi claims on hold pending the judicial review expected in early 2011, you may wish to look into your best options.Simply copying a generic complaint letter template may seem like a good idea and the cheapest way, but every bank receives thousands of these daily and may simply put these into a pile. 

If you have PPI attached to a sizeable loan or mortgage you may be better off seeking advice from a reputable Claims Management company. There are hundreds of these on the internet all fighting for your business. Most offer a “no win no fee” service and their commission rates are falling drastically as they rally for your business. They started out charging 25%, but some are now as low as 15% if you search around. 

With the economy looking set to get tougher in 2011 you need money back in your pocket. Taking 5 minutes to check your loan or mortgage policy and make a claim against missold ppi could be the fastest way to get £1000’s back in your bank account within weeks.

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