Westminster debates the loan protection gap
Andy Love MP, a member of the Treasury Select Committee, has challenged the government and the financial services industry to recognise a growing loan protection gap in the UK and take action to protect consumers “as a matter of urgency.”
In a recent Westminster debate, ‘Finding new ways to combat the loan protection gap’, Love (pictured) said the PPI scandal had led to a lack of confidence in protection products resulting in a “withdrawal” of this type of cover. The scandal was “toxic”, he added, with “little or no prospect that the main players will ever re-enter the market.”
Love said: “We must take the necessary steps needed to address the loan protection gap which exists in the UK in order to avoid impacting not only borrowers, but the wider UK economy. The PPI scandal has led to a lack of trust of all initiatives under the umbrella of ‘protection products,’ including those which will genuinely help the most vulnerable members of society. The mutual sector is leading the way through the use of debt waiver which shifts the emphasis to the lender to indemnify the loan rather than the customer insuring their income. Other lenders must now show leadership on this.”
CUNA Mutual has pioneered payment waiver, an initiative already live with three credit unions and soon to go live with the first building society. Payment waiver is simply a feature of the loan; an agreement between the lender and the insurer which comes at no additional cost to the borrower.
The first UK adopter of payment waiver was Plane Saver, a credit union to the aviation industry with an 8,000 member base including household names like British Airways.
John McDonnell, MP for Hayes and Harlington, where Plane Saver is based, said: “The payment waiver has worked well for my local Plane Saver Credit Union in both providing reassurance and protection for savers and at the same time encouraged saving. I have invited the minister (Economic Secretary to the Treasury, Andrea Leadsom) to visit my constituency and see how payment waiver has been successfully implemented.
She said there were “a number” of products which were available, including innovations such as payment waiver, and told the debate she would discuss the possibility of visiting the Plane Saver region with her team.
Paul Walsh, CEO of CUNA Mutual, said: “What we are offering is simple. If a borrower cannot work due to sickness or unemployment, they simply need to contact the lender and payments are immediately waived. We cannot sit back and let the shadow of the past impact on consumers’ financial security and it is time lenders and insurers step up, take responsibility and look around for the best solutions to this.”
Two further credit unions which have adopted CUNA Mutual’s payment waiver are Clockwise Credit Union and the Scottish Police Credit Union.