The Money Stop

PPI, which stands for Payment Protection Insurance, is a type of cover that is often sold with loans, credit cards, and other forms of credit. The purpose of the cover is to make repayments on the debt for a certain period of time if the policyholder cannot work and earn money due to illness, accident, or redundancy. The cover is often costly, but can prove valuable to those that can use it, as it offers peace of mind. However, it has been found that the cover has often been sold to those that can never claim on it, such as retired people and those that are self employed.

The Financial Services Authority has been cracking down on firms found to be mis-selling PPI for some time, and now the Competition Commission also plans to join in the fight against policies that are sold inappropriately to people who cannot use them or do not want them. Officials from the Competition Commission have added that lack of competition in the PPI market means that consumers are also being ripped off for around £1.4 billion a year.

The watchdog wants firms that sell PPI to make sure that consumers are fully aware of what PPI is and what it cover, and that they are not pushed into taking out the cover, as many have been in the past. In addition the watchdog said that it is thinking of bringing in a price cap on policies to make sure that consumers do not pay too much, and may also ban the sale of the policies alongside loans, credit cards, and other financial products.

A Competition Commission official 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.’

Recent additions:

• Get a good deal on your savings from a British bank
• Insurance firms could face huge losses
• Unemployment levels could rise due to housing slump
• Gas bills set to rocket
• Record deposits in banks for April
• More people opt for private healthcare

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