- 12
- Apr
While consumers are reeling under the pressure of high fees, and are considering turning away from the big banks, the FSA is continuing to investigate the financial industry.
However, consumers are misled concerning areas that the Financial Services Authority is investigating. Partly because they are combining the Office of Fair Trading’s actions and the FSA’s as one collective body, which is misleading.
The FSA is investigating whether PPI premiums are too high. Currently, PPI premiums can increase the cost of a loan by more than 50 per cent and offer little more than 20 per cent of the value of the loan. These issues are referred to the Competition Commission for examination.
The legitimate questions are about how PPI is sold and the real cost of banking and administrating a PPI policy. This creates a problem for the FSA and the Competition Commission.
The organisation needs to tread lightly. History has shown that a de facto cap on the bank’s earnings from PPI products will force them to recoup the lost income elsewhere.
Unfortunately, the poorest, uneducated, and relatively disadvantaged shoulder the burden – those who cannot afford a personal loan or a PPI to start with.
Consumer watchdog organisations are worried that the banks will take the same approach they did when the OFA capped overdraft fees last year. This will leave thousands of consumers unable to obtain debt management loans or afford a first home.
Fear that the banks will tighten their lending criteria until only the middle and upper income tax groups can obtain affordable loans is the main concern behind the debt charity’s mandate when lobbying government.
