PPI regulations tightened up after scandal
New loan insurance rules introduced
by Russell Shackleford, 3rd October 2011
New rules on the sale of PPI have come into effect from the 1st of October, after the PPI mis-selling scandal rocked the financial world.
After research by the Competition Commission, several new regulations are now in place regarding the sale of the much-maligned form of loan insurance, used to prevent situations such as the mis-sold PPI debacle from recurring by ensuring that consumers will be fully informed with regard to what exactly PPI, or Payment Protection Insurance, actually does, and the caveats that may move them to decide that they do not wish to take out a policy when getting a loan.
The specific details of the new rules include a requirement for insurance brokers to offer more details on the coverage in their promotional materials, explaining how much a PPI policy costs and ensuring that customers are fully informed that the loan coverage is completely optional and that they may be covered by other types of insurance.
They will also be responsible for annual reviews which will establish the cost of the PPI coverage, as well as making sure that borrowers know that they have a right to cancel their policy.
The rules are seen as being necessary to restore confidence in the PPI product after the widespread mis-selling of the policies to customers. High street banks encouraged millions of people to take out overpriced, useless and unwanted PPI policies in recent years, with many of these wronged consumers now out to claim compensation from the banks for advising them to waste their money.
Billions of pounds have been set aside by these lending institutions to ensure that they are able to afford the massive compensation payouts that a vast percentage of consumers are now entitled to claim on, though consumers still face a struggle to ensure they receive the full amount.