We Introduce You

Perhaps unwisely for a someone who can earn commission on Payment Protection Insurance (PPI), I’ve mentioned a few times how you can save money by going to a specialist insurer rather than accepting the payment protection offered by the secured loan, loan or mortgage provider.

Well, this morning I thought - as I’ve mentioned this a few times, then perhaps I should back it up by mentioning some of the specialist companies who offer stand alone insurance.

I’m not an expert in Insurance (some may argue I’m not an expert in anything!) So I had to do a bit of early morning Internet digging. As with more or less everything in the finance world, it ended up being a bit of an eye opener.

First of all I thought I’d build up a list of the providers, then visit their websites, read their policies, look at their prices and then present a concise list on here - job done - I could then go away and enjoy the remainder of the Bank Holiday - but oh no - life’s not like that.

To start to build up my list I visited Moneysavingexpert.com, The Motley Fool and thisismoney. I purposefully missed out the price comparison sites Moneysupermarket and Uswitch - my argument being that Insurers would only appear if they had a commission deal with the site.

Moneysavingexpert said “A growing number of firms, such as Best Insurance, Paymentcare and British Insurance offer cheap policies”

The Motleyfool said “Get it from a cheaper ’stand-alone’ provider, such as: paymentcare, Helpupay, Best Insurance, British Insurance, Burgesses, mortgageprotect and the Post Office”.

Thisismoney just repeated the same companies, but I still thought - this is great I’ve only visited 3 sites and I’ve already got 7 providers. But then I did some investigation and found that Mortgageprotect and Helpupay are one and the same company - they are both trading names of Pinnacle Insurance PLC. I then discovered that Best Insurance, British Insurance and Burgesses are trading names of British Insurance Ltd. So Martin Lewis’s (the moneysavingexpert) ‘growing number of firms’ was actually an unimpressive list of two (but I note he has a commission scheme with both!) and The Motley Fool’s slightly more impressive list of seven was actually four.

I then did a little bit more digging and found that British Insurance Ltd. trade under the names - WAIT FOR IT - Burgesses-insurance, Burgesses, 123-mortgage-protection, Protectiononline, Instant-payment-protection, Shelter, Bestinsurance, Protectyourloan, Uvinsurance, - DEEP BREATH - Rhinoinsurance, Protectyourmortgage, Protectyourearnings, Biba-mortgage-protection , Safetyfirst, Insureyourmoney , Goodinsurance and Stokeinsurance and this isn’t even a comprehensive list, believe me there are more!

I then scratched my head - scratched it some more and came to the conclusion that if you’re looking for payment protection insurance then the following seem to be the best companies to go to:-

http://www.payprotect.co.uk/
http://www.pinnacle.co.uk/
http://www.paymentcare.co.uk/
http://www.britishinsurance.com
http://www.postoffice.co.uk

Please bear in mind that some form of payment protection schemes pay the money directly to you - if you find yourself in the unfortunate position of being unemployed this may effect your benefits as it is might be seen as income by the Jobcentre. Please also note that if you apply for the Post Office cover, the Post Office is only acting as an ‘Introducer’ for Axa and as always - if you’re taking out any financial commitment, it’s sometimes wise to seek professional advice.

Ever since I was a wee lad in short trousers, I’ve always wanted to know how things work. In fact I rarely comment on something unless I’ve learnt thoroughly about it and formed an opinion in advance [an exception here is football - I know nothing about it - but to be a ‘modern man’, sometimes profess to].

Since I moved into the secured loans sector it’s been a joy to look under the bonnet of all the things that go on - the infrastructure - regulation and the dog eat dog world of Internet marketing.

Today I’ve been having a look into the companies that deal with secured loans listed on the London Stock Exchange. Two things that intrigue me are - only one is a FTSE 100 and ‘household name’ and many of the others are comparatively new listings.

Barclays PLC (BARC) is the FTSE 100 Company and, as mentioned in another post, deals in secured loans within its consumer lending division Barclaycard under the name Firstplus. There’s not really much else to say about Barclays except that under the Firstplus brand they must come somewhere near to the top in Internet advertising spend. They are an extremely aggressive advertiser and by some quirk of calculation always seem to get their loans to the top in listings on sites like Moneysupermarket.

Debts.co.uk PLC (DETS) is one of the new listings and floated in May this year at a price of 180p (now 213p). It also trades using the name Debt Counsellors, deals in IVAs as well as secured loans, is moving into larger premises and next year hopes to enter the mortgage market. Its maiden results to the year-end July 31st don’t come out until sometime in October. Probably as a result of the funds it got on floatation, it has said it is going to substantially increase its marketing spend (I just hope Carol Vorderman hasn’t got a twin sister they can employ!).

Compass Finance Group PLC (CAF) was admitted to AIM in March 2004 at a price of 48p (now 38.5p). As well as secured loans it deals in IVAs, mortgages, re-mortgages, insurance and unsecured loans. Earlier this year it raised £4.15 million to fund the acquisition of ‘The Debt Advisor’ and ‘The Business Debt Adviser’. Quite worryingly for a high margin business £3.15 million of this is to fund growth and support working capital and follows the raising of over £2million earlier in the year. Perhaps this is why the shares are down in price from flotation!

Debtmatters Group PLC (DEBT) floated in June 2005 at 65p (369p). It primarily dealt with IVAs and after sustained profit and turnover growth bought Bolton based Loanmakers in June this year. Loanmakers is one of the larger players in the secured loans business. Debtmatters bought Loanmakers for an initial cash consideration of £10million with an ‘earn out’ over the next 24 months of up to another £9million in a mixture of cash and shares.

Elephant Loans and Mortgages PLC (ELEP) floated in November 2005 at a price of 3p (now 3.75p). Elephant deals primarily in secured loans but in March this year launched Debtsmashers an IVA subsidiary. Quite interestingly at the time of the launch Elephant said that only 35% of secured loan applicants actually received a loan and Debtsmashers would offer its services to the remaining 65%

Another company that deals in secured loans, but to a lesser extent is Cattles PLC (CTT). Cattles offers secured loans but only up to £25,000 through its dial4aloan brand.

Another group One Finance was expected to list on AIM earlier this year, but for various reasons felt the time wasn’t right. One Advice deals under the trading names Allclear, Ask and One Advice and is expected to float either later this year or next year.

So there we have it, that’s the complete picture of secured loans businesses listed on the London Stock Exchange. As alluded to earlier, it is interesting that Elephant, Compass, Debts.co.uk and Debmatters have all floated within the last 18 months.

Yesterday a report that the Association of Mortgage Intermediaries (AMI) has produced a non-conforming (sub-prime) financial promotions fact-sheet caught my eye. Earlier this month the FSA release an update on its financial promotions work [available here in PDF format].

The report included information on the future direction of the regulator’s work, outlining a number of key areas it would focus on. One of these was the financial promotion produced by mortgage intermediaries, in particular non-conforming promotions from small broker firms.

In light of the upcoming focus in this area, AMI’s fact sheet covers the FSA’s specific financial promotions requirements and outlines the common errors the regulator has uncovered in non-conforming (sub-prime) promotions.

It’s pretty obvious that given that the OFT and FSA are joining forces to look at consumer credit advertising, it is only a matter of time before a similar report is produced for the secured loans market. In light of this I’ve taken the full FSA report mentioned above and extracted the points relevant to Sub-Prime brokers. It is my feeling that more or less exactly the same can be said (and will be said) for the secured loans market.

Here’s the extracts :-

Extract One

Sub-prime brokers

This is an area in which failures in the standards of financial promotions present a higher risk given that the target audience is potentially more vulnerable.

We observed limited improvement in the standard of promotions. We continue to see many firms which appear to be making no attempt to issue clear, fair, not misleading promotions, and other firms which have attempted to do so but fail through an apparent lack of understanding of mortgage regulation.

Common failings identified at baseline in 2005 included:

o Omission of the Annual Percentage Rate (APR);
o Incorrectly calculated APR;
o APR not being prominent enough;
o Lack of or inaccurate risk warnings;
o Risk warnings not being prominent enough;
o Lack of or incorrect fee disclosure information; and
o A failure to include a description of the drawbacks associated with a benefit described (e.g. after a promotion claims to reduce monthly payments, it should also describe any increase to the total term and overall interest payable).

After introducing the new regulatory regime, with our increased emphasis on financial promotions, we have communicated our concerns to as many of these firms as possible. We did this both through general communications (e.g. through our specific financial promotions bulletins, communications to small firms) and also through letters to firms.

We will continue to work with the industry to improve overall standards. However, we will also identify and deal with the worst firms - for example, those that continue to issue misleading promotions or those whose promotions suggest a lack of awareness of our requirements. This includes using formal enforcement powers where appropriate.

Extract Two

Mortgage brokers

A major challenge for us is to improve the standard of promotions by smaller firms, particularly within the sub-prime mortgage market. The target market for sub-prime lenders tends to be the more vulnerable consumer. So far, we have addressed these through educational material, guidance notes and on a case-by-case basis. We shall be focusing on ‘repeat offenders’, more serious breaches, those firms not showing sufficient awareness of the requirements imposed by regulation and, if necessary, taking formal enforcement action.

Extract Three

In terms of overall progress, 52% of investment promotions we reviewed in 2004 fell below the standards we expect. This figure now stands at 32%. But we have seen only limited improvements in the general insurance and sub-prime mortgage sectors. We expect firms, particularly those operating in these sectors, to take a critical look at their promotions and systems in the light of our findings and to take action to improve.

It’s interesting to note - given that the FSA has only recently taken responsibility for sub-prime mortgages and insurance - that it isolates them in the report.