Struggling homeowners may be at increased risk of home repossession because of the FSA's investigations into loan protection insurance, according to CETA Insurance.
David Quick, managing director of CETA, says high-profile investigations into mis-selling of Payment Protection Insurance (PPI), means many borrowers have shunned mortgage protection that could have helped them if they suffer from redundancy or illness.
UK unemployment has been rising in recent months, according to the Office of National Statistics, and an expected economic slowdown is likely to result in further job losses.
However, CETA says a lack of clarity from the FSA has resulted in many borrowers choosing not to use mortgage protection products, putting them at risk of repossession.
“We have repeatedly warned that the FSA should draw a clear distinction between competitively priced MPPI and the expensive loan and credit card protection that generated huge profits for banks and retailers,” explains Quick.
“Now the housing bubble is bursting and repossession orders soaring, many are likely to lose their homes because they were led to believe they should avoid ‘rip off’ MPPI cover. The FSA’s lack of clarity may have the effect of turning a crisis into a disaster.”
However, the FSA says it has only aimed to ensure people are not sold PPI that they are unlikely to be able to claim on, and does not discourage the use of PPI products.
A spokesman for the regulator says: “We’ve always said that PPI can be a worthwhile product for certain people.
"The changing economic condition does not affect our approach because we are concerned about those customers who would not have been fully covered by the policies they were sold, and therefore would not be effectively covered if they were made redundant.”
Quick also blames media coverage for failing to identify the difference between PPI sold by brokers and PPI sold by providers, and says media campaigns are a major factor in the growth of PPI complaints to the Ombudsman, which reached 10,652 in the last financial year.
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