Further crackdown on loan insurance rip offs

There is to be a further crackdown on rip off payment protection insurance cover, which is often sold to consumers who take out loans and other forms of finance.

PPI has been at the centre of controversy for some time, with many campaigners and regulatory officials claiming that lenders and providers of this cover are often mis-selling it and providing it to consumers who do not want or need it, or in some cases to consumers who cannot even claim on it due to their circumstances.

Whilst the Financial Services Authority has imposed some hefty penalties on providers over the past year or two when evidence of mis-selling has come to light many consumers are still being ripped off over PPI according to a recent report. In fact, officials from the Competition Commission have stated that consumers are being ripped off to the tune of around £1.4 billion a year simply because of lack of competition in the PPI market.

The competition watchdog has stated that it is thinking of introducing a price cap in order to keep the cost of PPI cover down for consumers, and was even considering banning the cover from being sold alongside credit agreements altogether. In the meantime it wants providers to ensure that consumers are getting adequate information with regards to what PPI is and what it covers, so that consumers can make a more informed decision with regards to whether they want the cover or not.

An official from the CC said: ‘We’ve found serious problems with the PPI market and consumers are paying for the lack of competition. The way PPI is sold as an ‘add-on’ to a loan or other credit product means distributors escape the pressure they should face from competing suppliers.’

He added: ‘Distributors don’t appear to compete much with each other on either price or quality of PPI, neither do they appear to do much direct advertising of PPI to win customers from each other.’