- Posted May 1, 2014 by
What will happen to the jobs?
PPI was designed to cover loan repayments if the policyholder were suddenly unable to repay their debt. But the policies were mis-sold on a massive scale to those who did not want or need them, or who would have been unable to make a claim.
And the move to compensate the victims has already had some strange consequences, with the demand for unsolicited consumer information at an all-time high. Often, texts with a misleading ‘bait’ line, sell the caller information for as much as £200 per lead. In one case, the Information Commissioner's Office (ICO), which polices data protection, has been investigating a company that offered to send out more than 800,000 texts a day on behalf of clients.
But he says it is often difficult to tell which leads have come from spam texts, and which have come from legitimate research of customers who have given permission to be contacted.
There are some rules designed to protect consumers. Companies must not send "persistent and unwanted" communications by telephone, fax, mail or email. The messages must include the company's name and details of how to opt out, and companies must make it simple for people to opt out.
So far, just over £10bn has been paid out in PPI compensation since January 2011, according to the latest figures from the City watchdog, the Financial Services Authority (FSA). Banks and building societies have set aside a staggering £18bn to cover the costs and compensation but this bill could go higher.
The scale of these numbers has taken pretty much everyone by surprise. This includes the FSA, which made an initial estimate of £3bn, and the banks which have been increasing their provision ever since.
While some of the total figures have been eye-watering, so have some of the pay-outs to individuals.
The average compensation level is £2,750. However, some people with very old claims are repaid interest that they paid in the past. This is because their PPI premiums were part of the loan, rather than an upfront payment.
When interest is added to interest (compounding) the figures can build and build. For example, one businesswoman from Hertfordshire was repaid £65,000 (Source, BBC).
Numerous consumers are championing the idea of ‘getting one over the banks’, but there needs to be a critical analysis of how this is going to effect the (already delicate) employment situation in the future. With the immediate job bubble that resulted from CMCs, bank telephone-agents and data clerks at FSA; what happens to these employees when everyone has claimed their
PPI back? When the last of the meat has been torn from the bone, what do these people do?
In fact, we may already be seeing the start of it. After speaking to a manager at a FRS, a <a href="http://www.financialrecoverysolutions.co.uk">PPI claims</a> company in Manchester, what was once a long ago thought is now turning into a stark reality. Recently, the company has been successful in restructuring internally, rebranding themselves as the Life Plus Group. The successful diversification into other aspects of financial services such as debt management has allowed them to stay ahead of the curve.
Unfortunately, this is not the case for everyone. A Google search for PPI companies, when called, showed that approximately 20% of them are no longer trading. While a normal feature of any industry, the analysis of domain age showed that most of these companies did not stay open longer than 8 months. With all the challenges facing the industry, we have to realize first and foremost that they are employers.