Banks And Finance Firms Hurting Recession-hit

[bluemonday]

Clicky

High street banks and finance firms are pushing recession-hit families to the brink of ruin by refusing to pay out on insurance policies that claim to offer protection against redundancy, a Sunday Times investigation has found.

 

Senior industry figures say as many as one in six claims are being rejected because of “weasel exclusions” in the small print or because the policies were mis-sold in the first place.

 

In the lending boom, the banks and finance firms received up to £6 billion a year selling the policies that cover repayments on mortgages, loans and credit cards.

 

The Financial Services Authority (FSA) has already fined some firms for mis- selling, but the scale of the scandal has been exposed by the recession. Many victims are fighting to save their homes.

[manshimajin]

Senior industry figures say as many as one in six claims are being rejected because of “weasel exclusions” in the small print or because the policies were mis-sold in the first place.

 

Don't know the details of this situation but I wonder how a bank can refuse to honour a contract due to mis-selling by its own agents? Would have thought that they have to pay out if the mistake can be proved to be theirs not their clients'.

 

IMO one of the really bad things that happened in the past 15 years or so is that banks moved into commission related sales for example life insurance, property insurance, contents insurance, car insurance, disability insurance, loss of income insurance etc etc...As more and more of their profit came from non-core banking activity banks seem to have put pressure on their staff to sell insurance products. The profit from these products increases as the sums insured increase. This is an incentive to lend more to generate more commission and to claim that the 'risk' is being covered by insurance. It also encouraged banks to do much more by way of higher risk consumer finance and unsecured credit card lending. I understand from bank employees that the 'Head Offices' placed enormous pressure on them to continuously up the sales of their 'commission' products.

 

Of course this was not the only thing that was going wrong in bank management but I suspect it was a significant contributory factor. It might be one area that should be uncoupled from banking if the regulators want a more secure banking system.