Personal Protection Insurance – are restrictions on the way?
Consumers who have been mis-sold Personal Protection Insurance (PPI)
will be pleased to hear that new plans to restrict the sale of this controversial product could be made a reality.
The Competition Commission is looking into banning the sale of PPI at the same time that a consumer takes out a loan. This is seen to be the main way in which consumers are mis-sold Payment Protection Insurance because they don’t have the opportunity to find a better deal.
Whilst Payment Protection Insurance is useful for people who may fall ill or lose their job, it’s also been found that many consumers are being mis-sold PPI
as they aren’t eligible to claim under its Terms and Conditions.
Consumer organisations have been bringing mis-sold PPI into the spotlight for several years, with great success: in October 2009 mortgage lenders and insurers agreed a £60m refund to customers who were mis-sold mortgage payment protection; in September 2009 the Financial Services Authority (FSA) ordered lenders to compensate customers who had been mis-sold PPI alongside unsecured loans.
This is just the tip of the iceberg. The Competition Commission found in 2006 that lenders were making profits of £1.4bn from PPI and that the vast majority of the UK’s 12 million PPI policies were sold at the same time as the consumer took out a loan or credit agreement. Consumer groups call PPI a 'protection racket' because many people are mis-sold PPI to the extent that they could never make a valid claim on it.
Consumers are also unaware that they can purchase their Payment Protection Insurance from another provider and can take some time to find the best deal for them, rather than feeling forced into the PPI policy offered with their loan. Useful links