As the FSA cracks down on mis-selling insurance policies, reports claim that HSBC has admitted a hole in the system, soon to be rectified
It would be impossible for anyone to have avoided the claims that HSBC, easily one of the largest banking enterprises in the world, has been accused of improprieties relating to the way in which they have gone about selling payment protection insurance (PPI) to their customers. While not the only institution to face this type of complaint (Barclays has also been reported to have been caught out), the appearance of these claims was somewhat unexpected. Even now there is some difference of opinion as to whether HSBC intentionally mis-sold the coverage or if the presentation of the product could have been handled more efficiently.
The origins of the issues have to do with the way that HSBC presented the scope of coverage in the payment protection insurance to their clients. Providing the cover on both credit card and loan accounts, the benefits of the PPI were supposedly to kick in when and as customers encountered some sort of covered event, such as a job loss. Thanks to the cover, the plan would take care of minimum payments on the covered accounts until the policyholder could secure another job and once again have sufficient income to pay the bills.
What was not always readily evident was just what type of events consumers were covered for. Complaints about the way the product was sold include not making their customers aware of what type of situations were exempt from the coverage. For example, in some nations, people who work as independent contractors are not able to benefit from PPI. At other times, consumers claim they were not readily informed that the coverage was optional and there was the chance to opt out if desired. As some of these customers encountered situations that they thought were covered by the PPI, only to discover they had been paying for something that was ultimately useless in their circumstances, the storm of complaints began to flood the company.
HSBC is not alone in experiencing complaints about the way PPI was presented to customers. But while some institutions have met deadlines for settling with disgruntled clients, there is evidence that this particular bank has not processed the complaints and issued refunds in a timely manner. In fact HSBC missed a deadline set by the FSA, a move that is likely to result in severe penalties even though the bank has set aside funds for the express purpose of settling these claims.
While the bank has been publicly responsive to the PPI scandal and made some moves to settle, the slow process has not stood the normally well-respected institution in good stead with governmental regulators or with the general public. Along with the pending FSA action, which is likely to come soon, there is also the possibility of additional penalties being issued by similar agencies in other countries. The end result is that by dragging the corporate feet in resolving the PPI issue with their clients, HSBC may find themselves paying out millions more to clean up the aftermath.