An investigation by Consumer Focus has revealed that Cash ISA’s could be costing UK consumers £3 billion a year in lost interest payments, a figure close to the PPI mis selling compensation estimation. Consumer Focus is a statutory organisation campaigning for consumer rights in England, Wales and Scotland, their research has uncovered yet another way that the banks are making the most of the lacks financial regulation.

The Individual Savings Account (ISA) was one of Gordon Brown’s ideas back in the late 90s, designed to help people put some cash aside and accumulate interest without tax deductions. Unfortunately it seems the banks have been taking a tax of their own from account holders and as a result of the investigation; Consumer Focus has filed a ‘Super Complaint’ with the Office of Fair Trading (OFT). We’re going to keep an eye on this story and will have more tomorrow.

The Financial Services Compensation Scheme (FSCS) manages and handles complaints from banking consumers against lenders and insurance intermediaries. As you can imagine; with the finance industry the way it is at the moment, they have their work cut out, which is why they’ve decided to start levying to cover the costs of payment protection insurance (PPI) claims.

These costs will be levied from the beginning of the financial year 2010/11 as the FSCS say that PPI claims are a growing area of its work and will be one of the highest costs in 2010/11. The amount being levied is just under £150 million and represents the surge in PPI related compensation claims over the last few years.

The cost of Mortgage Payment Protection Insurance (MPPI) is rising due to the high levels of PPI claims and unemployment meaning millions of homeowners may soon be paying a higher price for cover. In March alone, over 20,000 policy holders have had the cost of their MPPI increase by around 20%.

Those who closely follow Which? will be unsurprised by the rises in MPPI costs, the consumer body predicted at the beginning of the 4th quarter of ‘09 that MPPI policyholders “may well see price hikes in the new year”. One such provider that has increased its prices is Yorkshire building society, adding about £46 to the policy cost, although different policies will see different price changes.

- “An overhaul of the culture and attitudes of financial firms.”
- “A new approach to regulation to end mis-selling scandals.”
- “Mystery shoppers and on-site visits to financial firms.”
- “A proactive approach to anticipate and stop consumer detriment.”

Theses are the plans that Hector Sants has for the Financial Services Authority (FSA), he’s the head of the financial regulator and wants a reshaping of the consumer regulation adopted by the FSA. Instead of focusing on the way products are sold, it will now concern itself more with the actual structure of the products themselves.

Had this approach been adopted earlier, the hundreds of thousands of PPI claims would not be necessary and the FSA could’ve avoided the massive clean up operation it now has. Sants has said the FSA will assess products at the design stage and would step in if anything needed changing or if an industry-wide problem was found to be emerging.

Yesterday we blogged about the plate spinning that the Financial Services Authority has to do to manage PPI claims, consumer complaints, regulation changes and even lender complaints. Yes, lenders are complaining about the new regulations being proposed for the Payment Protection Insurance (PPI) industry and the FSA are saying: “We do, however, recognise the importance in ensuring that genuine concerns have been listened to.”

Fair enough, they have to extend the same rights to both lenders and consumers and if you read the revised consultation document from the FSA, it’s no wonder why the banks, other lenders, and insurance brokers are so worried. For starters, they would have to pay between £700m and £1.2bn over five years to those who have already claimed and on top of that they would have to dish out between £1bn and £3bn to consumers yet to claim. How does the saying go? What goes around comes around. More on this tomorrow.

Yesterday we blogged about how the new Payment Protection Insurance (PPI) rules have been held up by lender complaints, but these complaints will only delay the handling of more complaints, from consumers. As well as trying to get the lenders to agree on new rules, the Financial Services Authority (FSA) have also been dealing with a massive increase in PPI claims made to the Financial Ombudsman Service.

Needless to say, consumer organisations and the banking public have welcomed the regulation changes, but they will not see anything happen until the lenders and insurance brokers come to an agreement. For them, PPI sales are very lucrative, making over £4bn a year at it’s peak. In response to the complaints by lenders and providers, Dan Waters, of the FSA, said: “We are disappointed that the industry has responded so critically to our proposals but we remain 100% committed to bringing about genuine, lasting change in the PPI market.” Head back tomorrow for more on why the banks should be allowed to complain and the result of them not doing.

Continuing on from yesterday, the complaining lenders and insurance providers have only achieved one thing and that’s delaying the fair treatment of consumers who wish to buy PPI. The FSA’s own consumer panel has come out and said this, as well as pointing out the most basic foundation of PPI and it’s reason for being: to help people repay their loans if they cannot do it themselves.

That point is becoming increasingly overlooked as the public opinion of PPI slips further into the murky cesspit of malaise and mistrust. Ultimately, what’s been delayed is not only the overhaul of the rules on selling PPI, but also rules that will tell lenders and insurance brokers how to deal with PPI claims and complaints. Here’s where it gets juicy, more tomorrow.

Throughout this week, we’ll be covering the Financial Services Authority’s (FSA) attempts to shake up the Payment Protection Insurance (PPI) industry through the introduction of new rules and regulation. The law changes have been on the cards for over year now, since the FSA stepped in and burst the PPI mis selling bubble.

The new rules include the banning of the sale of PPI at the time of lending, with lenders only allowed to offer PPI after 7 days, but with any new regulation comes some resistance. This resistance has come in the form of criticism from the financial industry and has forced the FSA to extend its consultation on the new rules by another six weeks. Tune in tomorrow for more on this.

Got some money in a Swiss bank account? Well if you’re with HSBC, you better make sure it’s still there because an estimated 24,000 clients of HSBC Private Bank in Switzerland have had personal details stolen. The data theft occured three years ago and the bank conceeded last week that the number is “highly likely” to include British customers.

The data is on 15,000 live accounts and 9,000 defunct ones and was allegedly stolen by Hervé Falciani, a former IT employee. HSBC first learnt of a data breach in December 2008 and reacted by spending £62.3 million upgrading the security of its systems. A Financial Services Authority (FSA) investigation found that “large amounts of unencrypted customer details” had been taken from the systems and delivered to 3rd parties by post or courier. If you’re worried, contact your HSBC relationship manager.

We’ve all borrowed a fiver off a mate, maybe more, but a new website is taking peer to peer lending to a new level. Zopa.com allows users to do without banks and arrange a person-to-person loan and it’s seen lending double in the last 12 months. Over that time, £36.4m of loans were handled on the site, which is staggering when you consider it’s done £70.9 in total in the 5 years since 2005.

Tuning into the general malaise the UK public has about banks, Zopa has offered thos fed up with high street lenders an opportunity to get credit at favourable rates. And for lenders, it’s allowed them to get a greater return than they woud with a savings account. Those looking for credit can get any amount from £10 to £25,000 and lenders can set the rate of interest at which they are prepared to offer their funds.