BRITAIN'S banks have picked a new fight with financial regulators in the hope of avoiding multi-million pound compensation claims following the mis-selling of credit insurance.
The British Bankers' Association announced on Friday that it was going to court to block new rules on the way compensation must be paid due to come into force in December.
It will ask the court to judicially review guidelines laid down by the FinADVERTISEMENTancial Services Authority (FSA).
However, the FSA immediately announced it will contest the bankers' action, and advised institutions to continue handling complaints as they have been ordered. The Financial Services Ombudsman, which can adjudicate disputes unresolved by the banks, said it would continue operating as normal.
Credit insurance, to protect against sickness or unemployment, is believed to have been widely mis-sold, via hidden charges on credit cards, personal loans and other debt.
Peter Vicary-Smith, chief executive of Which?, said: "The BBA's taxpayer-backed members should take a long, hard look at themselves and ask why they continue to wage this ridiculous war on consumers."
Elsewhere, it has emerged that more than half of all current accounts no longer pay interest, according to Moneyfacts.co.uk.
Current account customers typically receive just 0.77 per cent interest compared with an average rate of 1.43 per cent five years ago. A total of 55 per cent of current accounts pay zero interest to customers who are in credit. A further 28 per cent pay 0.1 per cent or less.
Rate stays at record low
THE Bank of England held UK interest rates at the record low of 0.5 per cent for the 19th consecutive month.
The bank also voted to hold the £200 billion quantitative easing programme at its current amount. Rates have remained fixed since March 2009.
Cut in tracker rate
BARCLAYS has cut its lifetime tracker mortgages by up to 0.41 per cent to celebrate mortgage lending hitting £100 billion. The new rates start at Bank of England base rate (currently 0.5 per cent) plus 2.08 per cent, giving a pay rate of 2.58 per cent, on life time tracker mortgages with a 30 per cent deposit and a £999 fee.
HSBC cut rates on all its 80 per cent loan-to-value mortgages by 0.4 per cent. All the products, which require only a 20 per cent deposit, have booking fees at £399 or less. The bank also introduced a two-year discounted mortgage at 2.79 per cent with a £99 fee.
Lloyds TSB Scotland launched its lowest ever three-year fixed-rate mortgage at 3.99 per cent. The product is available to first-time buyers, house purchasers and remortgagers with a 30 per cent deposit. The deal charges an £895 fee.
Sunday, October 10, 2010
India's Regulator Suspends Sale of Credit Insurance
India's Insurance Regulatory and Development Authority has stopped the sale of credit insurance by nonlife insurers due to reports of malpractice and inadequate information for the selling of the products.
Nonlife insurers sell credit insurance to banks offering credit facilities to debtors. IRDA said "it is observed that such covers appear to be in the nature of credit default insurance," and such covers need a different regulatory treatment.
"After examining the credit default insurance contracts IRDA has come to the conclusion that the insurers are underwriting risks which do not have proper regulatory framework or sanction," said IRDA, in a statement.
The regulator has ordered all nonlife insurers to stop selling credit insurance until the authority develops detailed guidelines. IRDA said it will seek details of total credit risk exposure of companies and information provided with credit insurance policies issued by nonlife insurers to banks.
The sanction does not apply to Export Credit Guarantee Corp. of India Ltd., a government-owned company that provides export credit insurance support to Indian exporters.
Nonlife insurers sell credit insurance to banks offering credit facilities to debtors. IRDA said "it is observed that such covers appear to be in the nature of credit default insurance," and such covers need a different regulatory treatment.
"After examining the credit default insurance contracts IRDA has come to the conclusion that the insurers are underwriting risks which do not have proper regulatory framework or sanction," said IRDA, in a statement.
The regulator has ordered all nonlife insurers to stop selling credit insurance until the authority develops detailed guidelines. IRDA said it will seek details of total credit risk exposure of companies and information provided with credit insurance policies issued by nonlife insurers to banks.
The sanction does not apply to Export Credit Guarantee Corp. of India Ltd., a government-owned company that provides export credit insurance support to Indian exporters.
Credit Life Insurance for Bad Credit Car Loans
Weighing the pros and cons of credit life insurance as part of a bad credit auto loan
Now what?
Once you’ve picked out a car and received the final approval for a bad credit car loan, there are a number of decisions you may still have to make. We know, because at Auto Credit Express we’ve been working with poor credit car buyers for over two decades.
Having seen the embarrassment and frustration that many customers with bad credit often face, we even created a web site to accept applications and match these people up with local dealers that specialize in customers with credit issues.
The alternative – buying a vehicle from a tote the note, we finance anyone car dealer – can be a problem because normally these dealers don’t report your payments to the credit bureaus. But even taking out a loan through a dealer with a legitimate national bad credit lender can end up badly simply by choosing the wrong kind of vehicle. Both situations can create problems and either one might even result in repossession.
The car loans with bad credit process can also be confusing, because in addition to the loan itself, the special finance manager who helped to arrange the loan is bound to offer you a number of “back end” products that you may never have heard of, one of which is bound to be credit life insurance.
Credit life insurance explained
Credit life insurance is a form of term life insurance. Term insurance refers to an insurance policy that, unlike whole life insurance, is in force for a fixed period of time and cannot be renewed. And, also unlike a whole life policy, a term insurance policy builds no cash value.
In addition to being a form of term insurance, credit life insurance is also considered to be a “decreasing” term policy. This means that the payout on the policy is designed to match whatever the loan balance happens to be at any point throughout the loan term. As the loan is paid off, the loan balance decreases and the amount of life insurance covering the loan balance also decreases to match the amount owed on the loan contract.
Buying credit life insurance
If you decide to buy credit life insurance, you usually have to do it at the time you sign the loan contract. The monthly insurance premium is based upon the original loan balance and the cost is added to the finance contract and becomes part of your monthly car payment. This means that because it is part of the finance contract and not paid in a lump sum, you will be paying interest on the life insurance premium as well as on the vehicle loan.
Is it worth the cost?
Whether or not it’s worth the cost is a decision that you’ll have to make. Here are a few of the facts:
Advantages:
1. Peace of mind – credit life insurance will pay off your car if you should die before the loan contract is paid off.
2. A single payment – the insurance payment becomes part of your monthly car payment, so there is no separate insurance premium you’ll need to pay.
3. If the loan is covered by credit life insurance, your estate won’t be responsible for the loan balance or loan payments if you die before the car is paid off.
Disadvantages:
1. Generally speaking, credit life insurance is usually more costly than if you were to take out a separate term life insurance policy for the loan amount.
2. In addition to paying insurance premium, you are also paying the interest expense on the balance of the policy cost every month.
3. If there is no co-signer on the loan and you are single, even if the loan isn’t paid off before you die your family is not legally responsible for the loan balance.
As we see it
The decision to carry credit life insurance on your loan contract is one that you will have to make. If you have a family or a co-signer and you’re worried that they might not be able to make payments on your car if you die, you might want to first look at the costs of a term life policy before you sign on the dotted line making credit life insurance a part of your car loan.
At Auto Credit Express we have helped thousands of people with bad credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Unlike other sites, our toll free number is listed on every page in case you have any additional questions.
So why not begin the process right now by filling out our secure online bad credit car loan application to see what we can do for you.
Now what?
Once you’ve picked out a car and received the final approval for a bad credit car loan, there are a number of decisions you may still have to make. We know, because at Auto Credit Express we’ve been working with poor credit car buyers for over two decades.
Having seen the embarrassment and frustration that many customers with bad credit often face, we even created a web site to accept applications and match these people up with local dealers that specialize in customers with credit issues.
The alternative – buying a vehicle from a tote the note, we finance anyone car dealer – can be a problem because normally these dealers don’t report your payments to the credit bureaus. But even taking out a loan through a dealer with a legitimate national bad credit lender can end up badly simply by choosing the wrong kind of vehicle. Both situations can create problems and either one might even result in repossession.
The car loans with bad credit process can also be confusing, because in addition to the loan itself, the special finance manager who helped to arrange the loan is bound to offer you a number of “back end” products that you may never have heard of, one of which is bound to be credit life insurance.
Credit life insurance explained
Credit life insurance is a form of term life insurance. Term insurance refers to an insurance policy that, unlike whole life insurance, is in force for a fixed period of time and cannot be renewed. And, also unlike a whole life policy, a term insurance policy builds no cash value.
In addition to being a form of term insurance, credit life insurance is also considered to be a “decreasing” term policy. This means that the payout on the policy is designed to match whatever the loan balance happens to be at any point throughout the loan term. As the loan is paid off, the loan balance decreases and the amount of life insurance covering the loan balance also decreases to match the amount owed on the loan contract.
Buying credit life insurance
If you decide to buy credit life insurance, you usually have to do it at the time you sign the loan contract. The monthly insurance premium is based upon the original loan balance and the cost is added to the finance contract and becomes part of your monthly car payment. This means that because it is part of the finance contract and not paid in a lump sum, you will be paying interest on the life insurance premium as well as on the vehicle loan.
Is it worth the cost?
Whether or not it’s worth the cost is a decision that you’ll have to make. Here are a few of the facts:
Advantages:
1. Peace of mind – credit life insurance will pay off your car if you should die before the loan contract is paid off.
2. A single payment – the insurance payment becomes part of your monthly car payment, so there is no separate insurance premium you’ll need to pay.
3. If the loan is covered by credit life insurance, your estate won’t be responsible for the loan balance or loan payments if you die before the car is paid off.
Disadvantages:
1. Generally speaking, credit life insurance is usually more costly than if you were to take out a separate term life insurance policy for the loan amount.
2. In addition to paying insurance premium, you are also paying the interest expense on the balance of the policy cost every month.
3. If there is no co-signer on the loan and you are single, even if the loan isn’t paid off before you die your family is not legally responsible for the loan balance.
As we see it
The decision to carry credit life insurance on your loan contract is one that you will have to make. If you have a family or a co-signer and you’re worried that they might not be able to make payments on your car if you die, you might want to first look at the costs of a term life policy before you sign on the dotted line making credit life insurance a part of your car loan.
At Auto Credit Express we have helped thousands of people with bad credit buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. Unlike other sites, our toll free number is listed on every page in case you have any additional questions.
So why not begin the process right now by filling out our secure online bad credit car loan application to see what we can do for you.
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