Are we getting somewhere with the fight against PPI mis-selling?

PPI, or Payment Protection Insurance, is something that has spent a lot of time in the financial headlines over the past couple of years, and whilst a lot of consumers have been talked into taking out this form of insurance cover investigations have revealed that in many cases the insurance has been mis-sold for a variety of reasons, turning the whole subject of PPI into a highly controversial one.

There have been, and still are, many people that can benefit from taking this sort of cover, but industry groups have been trying to highlight the fact that there are also people that may be talked into taking out the cover even though they will never benefit from it and people that have had cover included in their finance deals without even knowing.

PPI is a form of insurance cover that is sold alongside different types of finance, such as credit cards, loans, car loans, catalogue credit, etc. The purpose of the cover is to cover repayments for the policyholder for a set period of time in the event that the policyholder cannot make repayments on the debt due to sickness, accident, or redundancy.

However, whilst the cover sounds good in theory there have been many people that have paid a lot for this protection without realizing that they cannot ever claim on it, and many others that have been talked into taking out the cover even thought they didn’t want it. This is something that campaigners and various groups have been trying to put an end to, and even the Financial Services Authority, the UK’s financial regulator, has become heavily involved in the crackdown on PPI, having levied heavy fines on a number of lenders that have been found to be mis-selling this cover.

PPI cover is available from independent providers, and has also been sold by lenders such as banks, which earn a healthy commission from PPI sales, which goes some way towards explaining the hard sell tactic that many have used over the years. Whilst consumers that do want to take out this cover can in theory shop around to get the best price – as it can be quite a costly form of cover – some lenders have made out that the cover has to be taken from them along with the finance, which is not the case. In fact, there have been numerous problems and mis-selling tactics that have been tied to PPI sales, and this is why campaigners have been working tirelessly to try and rectify the situation.

It appears that the years of campaigning, however, may be at last having some desired effect, according to a recent report. The reports claim that a number of major banks have now decided that they will stop selling PPI alongside their unsecured loans, which means that consumers will no longer have to worry about being pushed into taking cover, and if they want to take out cover they can comfortably make their own choice from a selection of providers without feeling pressured to take it from a particular provider. Even the Competition Commission has threatened to stop the sale of PPI with loans and credit in the past, reflecting just how serious mis-selling was becoming, so the decision to stop these sales by the participating banks comes as good news.

There are five major banks that have said that they will stop selling PPI with their unsecured loans, and these are Alliance & Leicester, Barclays, the Co-operative Bank, Lloyds Banking Group, including HBOS, and RBS, which owns Natwest. These banks will still offer regular premium PPI, which is a regular monthly charge to cover repayments on a loan or credit card. However, previously the PPI sold was single premium PPI, where the cost of the cover was taken as a lump sum, added to the finance, and then had interest charged on it along with the rest of the finance, resulting in the cost of the cover soaring.

Officials do urge consumers to remember that PPI is not necessarily a bad thing, although there are rising concerns over the costs associated with the single premium PPI cover that is added onto finance thus attracting high interest payments. In the current financial climate, where there is a lot of uncertainty over job security, many people may find that this cover offers them peace of mind when they take out any form of finance, but it is vital to shop around and check prices from different providers. One useful thing to remember is that the FSA offers a guide for those looking for PPI, and enables consumers to find the most suitable cover from a list of providers based on their needs.