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Tuesday, 14 February 2012

TELEPHONE PESTS

Every single day, we receive at least three or four telephone calls from companies attempting to sell us their services in dealing with the banks for selling us PPI. We never had need of PPI and generally, as soon as the caller identifies themselves, we hang up. As it is a machine making the call, such a display of bad manners has absolutely no effect in persuading the caller to stop calling. I have yet to find a way to stop the calls.

The sale of PPI was not always wrong, as protecting against unemployment and critical illness makes sense, if the cover is correct and the premiums are proportionate. Of course, this is where the banks took people to the cleaners, frequently without their knowledge. It is now costing the industry dearly but until those responsible for devising the scam and those who sold it, are held personally responsible, the compensation will simply be covered by higher charges imposed on the self same customers who were ripped off in the first place.

As an IFA I have dealt with several clients who have been sold PPI by their banks, tacked on to loans to cover anything from cars to holidays. The difference in premiums, between plans sold by the banks and those which could be attained through the internet or from an IFA, were sometimes enormous and not readily explained. A young couple approached me, having just arranged a car loan for £5,000 with their bank. As their income was limited, they agreed to take the loan over five years, in order to keep the monthly payments as low as possible. Their reason for coming to see me was because they had been told, not advised or persuaded, but told, they needed to take PPI before they would be granted the loan. That was illegal.

The monthly premium for the PPI to cover the loan of £5,000 came to £57 per month and at first, I thought the young couple must be mistaken until they produced their agreement. I tried several different companies and internet sites but could not come up with a premium that even approached that being asked by the bank. To try to understand how they calculated the premium, I called the bank for an explanation. The fact I was acting on behalf of one of their customers did not impress them in the slightest and I was told, politely, to go take a hike. However, after some persuasion, I was eventually given a breakdown of the method by which they calculated a premium which far outstripped any other premium I had been able to find. Their ingenuity can only be marvelled at and goes some way to explain how their executives manage to "earn" bonuses while making such enormous losses.

There is no question of the banks searching the internet to find the cheapest premium, they applied their own, which inevitably, were several pounds a month more expensive than those from other insurance companies. The total cost over five years or 60 months was then calculated and that sum was advanced as another personal loan. The interest on that loan was 8%, which was then calculated over the full 60 months and added to the cost of the five years of premiums for the insurance. The total was then divided into monthly premiums. The same cover for which the bank demanded £57 per month, was available on the internet for £8.97.

There is a great deal of angst about the strength of public feeling against the banks, commentators arguing there is a danger the UK could end by driving the best bankers out of the country. When examples of that kind of ripping off of their customers, the endless complaints about ludicrous bank charges being racked up for being pennies over drawn and the banks' failure to lend, despite the Bank of England having pumped £325 billion into the economy, most of which has gone to build up the balance sheets of the banks, we really should be asking if we would actually miss them.

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