Beware when it comes to Payment Protection Insurance for your mortgage.

When you’re buying a house there is often a need to protect you income. If you fall ill and can’t pay your mortgage – you could lose your home. This is where Payment Protection Insurance has been highly successful – giving millions of homeowners peace of mind in case of anything going wrong.

But a recent case highlights some issue and Peopleschampion.com believes you should be cautious about signing up unless you are sure of what you are getting.

Jim Spowart, chairman of Peopleschampion.com, said: “Payment Protection Insurance is a great product – but the recent case has shown that the consumer has to be vigilant. All credit to the FSA for highlighting this issue.”

The Financial Services Authority recently fined Regency Mortgage Corporation Limited £56,000 for failures relating to its sale of mortgage related Payment Protection Insurance.

It is the first time the FSA has taken action against a firm for sales of PPI since the regulation of general insurance started in January 2005.
The FSA found that Regency did not treat its customers fairly and failed to organise and control its business effectively. In particular, it said that Regency did not collect sufficient information during a PPI sale to ensure its recommendations met customers' demands and needs.

“This is a key point,” says Jim Spowart. “It is important that the insurers find out everything they can about your circumstances – so they can get the cover that you require.”

In a number of cases customers were sold a policy for which they already had cover or were sold a policy under parts of which they were unable to claim.

In addition, both Regency’s procedures for compliance and record keeping were inadequate and senior management did not receive sufficient information to identify risks in PPI sales.

The FSA said: “Regency's breaches were particularly serious because as a specialist in the “Right to Buy” market, its customer base consists primarily of sub-prime customers who traditionally have limited financial means and access to credit.

“The risks for these customers are therefore high if they are not eligible to claim on a recommended PPI policy or if the policy is not suitable for their demands and needs. The cumulative effect of the failings in the firm's systems and controls exposed their customers to an unacceptable risk of being sold PPI policies which were not suitable for their needs.

The FSA’s Managing Director for Retail Markets, Clive Briault, said on his website: “We have highlighted Payment Protection Insurance as an area of high potential risk to consumers … Regency Mortgage Corporation Limited exposed its customers to an unacceptable level of risk and our action sends out a message to firms operating in the payment protection market that they must operate in a way that treats their customers fairly and meets regulatory requirements.”

To search over 3800 mortgages click here

« return to news index