Advisers need to cover every angle to ensure that payment protection insurance is the right product for clients as claims management companies (CMCs) see PPI as an opportunity to claim compensation, regardless of whether it was mis-sold or not, an IFA has told FTAdviser.
Bob Riach, principal at Riach Independent Financial Advisers, stresses that there is nothing wrong with PPI as a product, only that it was sold to people that did not need it. However, whether it was mis-sold or not, CMCs will still put the case forward to clients that the product was not needed, regardless of the consequences.
In one example cited by Mr Riach, he was approached by a couple who wished, but were too young, to access the husband’s pension pot to pay off their mortgage. As the husband, who had been diagnosed with a terminal illness and given six months to live, was unable to work, their mortgage lender was putting pressure on them to pay off their small mortgage.
Ironically, six months prior to the diagnosis, they were approached by a CMC who told them they had been mis-sold their PPI. They put in a complaint and the mortgage lender paid out compensation.
Mr Riach said: “If they had the PPI, they would not be in this situation and would not be trying to access their pension pot. They told the lender they were mis-sold the PPI as they had been told to say that by a CMC.
“There is nothing wrong with PPI but everytime I arrange one now, which actually isn’t very often as it can be expensive with a mortgage, you have to cover every single corner to make sure you will avoid a potential lawsuit. I dread opening my post and compliance emails in case it is another PPI complaint.”
Mr Riach also believes that PPI complaints should be time-barred. Earlier this month, the FSA announced that it is considering a proposal brought by the British Bankers’ Association to implement a time limit on for complaints about mis-sold payment protection insurance.
According to a statement released by the regulator, the BBA made an approached to discuss the “potential for introducing a time limit” on the condition that the banking industry funded a “sufficiently widespread advertising campaign to ensure consumers are aware of the PPI issue and how to complain”.
The mis-selling of PPI has become one of the most costly scandals in history, with figures produced by the regulator in September 2012 showing that total redress had reached some £5.4bn.