Banks have been warned by watchdogs they risk mis-selling payment protection insurance (PPI) substitutes unless they follow new guidance.
The Financial Services Authority (FSA) and the Office of Fair Trading (OFT) have today published advice on dealing with a new generation of insurance and debt products.
It comes as banks are trying to put a deadline on reclaiming mis-sold PPI as early as summer 2014, a demand we strongly oppose. To be safe, Reclaim PPI for Free now (the link includes a template letter).
PPI, which covers loan or credit card payments when people cannot work, was widely mis-sold by financial services firms for years.
Latest figures show more than £8 billion has been repaid to victims since January 2011. The total industry-wide bill is estimated to reach at least £15 billion.
While firms have largely stopped selling controversial PPI, they have begun to develop replacement products. These include short-term income protection insurance or debt freeze/debt waivers linked to a credit agreement or mortgage.
The guidance states firms, when selling the new cover, should:
- Identify the target market.
- Ensure the cover meets the needs of that market.
- Avoid creating barriers preventing consumers from comparing, exiting or switching cover.
- Clearly state the cost and implications of taking out cover.