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PPI ban could mean higher fees and charges

June 22, 2009 by admin  
Filed under News, News-Insurance

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It was announced recently that regulators are planning to stop the sale of the controversial single premium Payment Protection Insurance policies from lenders in 2010, and in fact in a bid to stop the sale of these policies regulators actually contacted lenders last month asking them to stop selling single premium PPI by the end of last month.

Single premium PPI is taken in a lump sum and added to the finance that the consumer takes out, which means that the borrower ends up paying interest on the insurance costs.

However, whilst the ban on the sale of single premium PPI could be could news for consumers there are also concerns about how this ban will affect the cost of borrowing. Some industry officials have expressed concerns that the ban on single premium PPI will force lenders to try and recoup the financial losses in other ways, and this could mean hiking up fees, charges, and interest rates on borrowing for consumers.

PPI is designed to cover the repayments on borrowing for policyholders who fall ill, suffer an accident, or are made redundant, and are therefore unable to cover their repayments for a period of time. However, experts are quick to point out that consumers can shop around if they are interested in taking out this type of cover.

One official said: ‘The ban on single-premium PPI is good news and long overdue. Borrowers should remember that they don’t have to take PPI with their loan provider and they can buy a stand-alone policy elsewhere, which may be cheaper.’

PPI has been under fire for some years, after investigations carried out by regulators revealed that in many cases this type of insurance cover was being mis-sold by lenders, and was sometimes being pushed onto people that were not even eligible to claim on it.

Tags: payment protection insurance, credit card insurance, single ppi policy, loan insurance, ppi

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