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The OFT transferring PPI to the Competition Commission could be seen as getting rid of a Hot Potato - but it was a struggle to find a picture of a potato that looked “Hot”

I’ve had a first glance at the OFT’s report into the Payment Protection Insurance Market and its subsequent transfer to the Competition Commission and it’s quite an eye opener. One of the most shocking things was when they reported finding a loan with a headline APR of 5%, but when you added in the PPI cost, the true APR came out at a whopping 13%! I’ve often written about this subject and always had the view that it was unfair to consumers that the APR didn’t include the PPI cost and it’s always presented a loophole for the less scrupulous loan dealers to exploit.

I’ll be posting more about PPI as the story unfolds, but in the mean time, I’ve extracted the points relevant to the secured loans market and created a second OFT/PPI page. The page includes an ‘Executive Summary’ and is well worth a read if you don’t get time to read the whole thing.

Perhaps this is a solution to the finding a Hot Potato image problem

The OFT has announced today that it is referring the Payment Protection Market (PPI) to the Competition Commission and rather than prattle on about it in an incoherent manner, I’d prefer to appraise the situation prior to doing a more detailed post about it later.

At first glance, there doesn’t appear to be any new findings in the press release, but it’s interesting to note the comments of the OFT’s Chief Executive John Fingleton ‘Following the work we have undertaken it is clear that many consumers are failed by PPI - insurance which gives them a poor deal and often less protection than they think. There is limited evidence the industry is taking steps to improve the situation, but we believe they will not make major improvements to competition in the market. Given our evidence and the scale of this market, our provisional view is that it would be appropriate for the Competition Commission to investigate further.’

At some stage I’ll also update the page OFT report on PPI to include sections relevant to the secured loans market.

One little story that caught my eye today was over the confusion organisations sometimes have over whether they should be charging VAT for their Financial services or not.

The story mentioned above, talks about Financial Packagers being exempt from charging VAT, but when they bunch together to form an Alliance then the monies they receive from lenders, for commission/marketing etc., ARE vatable.

The story illustrates just how common place such confusion is. It also talks about one organisation being told by their accountant that they did not need to charge VAT, only to later learn from the Customs and Excise that they did need to charge VAT. My advice for anyone pondering such an issue is to ask the Customs and Excise directly and to cut out the accountant - it is always better to hear things straight from the horse’s mouth.

The story talks about one organisation facing a bill of £750,000 for 6 years of unpaid VAT - so you might well end up wearing a barrel as well as being put over one!

For the record, item 9 from Notice 701/49 of the HMRC VAT manual tells you which supplies of intermediary services are exempt from VAT. And item 10 details what is meant by the term “financial service”.