Citizens Advice were today delighted with the Office of Fair Trading (OFT) to their super complaint made about payment protection insurance (PPI) in September.

Citizens Advice complained that PPI offered with loans and credit cards was disproportionately expensive and more about creating profit for the lender than protecting the borrower. The OFT has announced an investigation into the PPI market.

PPI Cost Rip Off

Reports from over 270 Citizens Advice Bureaux (CAB) showed that PPI could cost anything from 13 to 56 percent of the total loan. The insurance is usually added as a one off sum to the amount of the loan, thereby increasingly the amount owed by the borrower.

In one example, the insurance premium for an £11,000 unsecured personal loan was £5,133 - a staggering 47%. For a five year loan, this cover can easily be independently obtained for under £1000.

CAB report that borrowers are often sold policies that are completely inappropriate. High pressure selling or unfair practices can force people to take out insurance that they cannot afford, do not want or need. They find that these practices are widespread throughout the credit industry.

Medical Evidence

Further problems are uncovered when borrowers need to claim on the policy. For some conditions, CAB found that there were unreasonable requirements to provide medical evidence to support a claim. In other cases, CAB are concerned that borrowers are put off making a claim by the cost of obtaining necessary medical evidence.

Case to Answer

We are investigating PPI for a major report in January. We checked a high street lender quote for an £11,000 loan. Over 5 years, the lender quoted £2580 for payment protection insurance. We found independent cover available for £696, a difference of £1884.

How to Buy Payment Protection Insurance

We believe that many borrowers do not realise that payment protection insurance is a separate product to the loan and can be purchased from a number of different companies. If you are shopping for a loan, get a quote with no insurance cover added. You should then shop around for insurance. Try any search engine for the terms PPI, ASU or LASU cover (all of which are similar products). As with any purchase, compare prices and be sure you are happy with the cover and conditions before you buy.

Related Internet Links

Citizens Advice Complaint about mis-selling of PPI