What are the new rules & regulation regarding mis-selling?

Following the scandal of the systematic mis-selling of PPI in the United Kingdom, various rules and regulations have been formulated in an attempt to stop such things from happening again in the future.

Payment Protection Insurance (PPI) was designed for people so that in case of any accidents, sickness, death or unemployment they can continue repaying their loans.  This PPI was sold by the banks and lenders when customers took out both personal and business loans, mortgages and credit cards.  The mis-selling, most of the time deliberate, was to people who were not eligible to ever make a claim on the insurance due to self-employment, retirement, medical conditions etc. Many people were wrongly told the PPI was compulsory, or even were opted in to pay the PPI premiums without their knowledge or consent.

The Financial Services Authority helped bring about the end of the PPI mis-selling, paving the way for millions of people to claim their money paid in premiums back, with added interest.  Due to the sheer scale of the scandal however, new bodies have been set up to monitor our financial services industry, with the FSA now called the Financial Conduct Authority.

The government’s Competition Commission have introduced a batch of measures (rules and regulations) aimed at bringing a change in the way the PPI policies are sold to those who apply for loans, mortgages or credit cards.  Under the new laws and regulations, the banks or financial companies selling PPI policies to the customers have to make the following things clear and explain about the primary features of the policies to the potential customers:

The banks and financial companies have to make sure that aren’t involved in any mis-selling of PPI policies.  If they do, not only do they have to pay further in the form of compensations, they also have to face the legal consequences.

The banks must make it very clear to all customers that PPI is optional and not mandatory.

In case a customer is keen on knowing the claims ratio that explains the number of policy holders who make a claim on the insurance policy, the banks and the financial companies have to give proper information on it.

A credit card holder must be furnished with the annual statement of his account.

The banks must spell out clearly the right to cancel a PPI policy.