The massive mis-selling of payment protection insurance (PPI)
saw the rise of a debate regarding how banks and lenders sell to
customers. 'Routine' sales were questioned and as a result, changes
were made to safe guard the customer…
Emotional vs. rational decisions
Purchases of all kinds are an emotional decision. You buy food,
for example, because you need it to survive, without it, you go
hungry.
Customers applying for loans, credit cards, mortgage etc. as
financial products are making an emotional decision. In other
words, they saw what they were buying or investing in - the home
improvements, the new car etc. - and not whether the product they
were being sold was the right one or not.
Taking advantage
Banks and lenders, like all other businesses, knew this and take
advantage of the situation, offering various additional products
that would 'enhance' the customer's experience. With financial
products, for example, they would often ask how would you cover
repayments if you were no longer working?
They would sow a seed of doubt, sound a warning bell that made
you question how you would pay the loan in such a circumstance.
Even if you had other insurance policies, the bank or lender would
go on to offer you a 'magic' product that for a few extra pounds a
month, would make sure that you would not end up in financial
problems. You were hooked and you bought the product.
Advised sales - setting out the reasons why
And so, the lines between suggesting a product and an advised
sale were blurred. If you take out a loan with a bank,you do not
need to take on any other additional product.
It may be a good ideaif the policy is the right one for you.
It may be a wise and prudent moveif you know your job is looking
a little shaky in the future etc.
It would seem a responsible thing to do BUT, you still do not
have to buy the banks' own product.
Like car insurance, you CAN shop around and get the right deal
for your current circumstances.
If, however, the bank insists that as part of the package that
their own product is the one you must have, then they must clearly
tell you why - and not just verbally. As anadvised sale, they must
set this out in writing and clearly show the reasons why, as part
of this package, their policy is not the best, butthe right one for
you at this time.
Breathing space
Consumer law is clear - you have 14 days from signing the
agreement to change your mind. Customers also thought that this law
did not apply to financial products, but it does.
But now, the Financial Conduct Authority, along with various
consumer groups have worked to introduce a breathing space within
which products in addition to the main product cannot be
offered.
Customers are to begiven time and spaceto consider the main
product before they are offered anything else. Customers must be
given ALL the information to make an informed decision. And they
are not be badgered or hoodwinked.
Practices have changed BUT, if you think you have a claim for
PPI compensation act now by calling Payment Protection
Scotland.