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15/05/07 : Loan insurance backlash begins

A backlash against controversial payment protection insurance (PPI) is growing as borrowers avoid policies from High Street lenders and buy cheaper, stand-alone cover.

PPI, sold with loans and credit cards, is supposed to cover repayments if policyholders cannot work because of sickness or unemployment.

The £5.5bn market is highly profitable to banks but has been dogged by widespread mis-selling.

It is now possible to pursue the matter and reclaim missold loan protection insurance.

And research by consumer lobby group, Which? found that lenders, including NatWest, Royal Bank of Scotland, Lloyds TSB and Alliance & Leicester, were regularly including PPI in loan quotes without making this clear to potential borrowers. Mis-selling claims are rising.

02/05/07 : Loan cover rip-off 'widespread'

Researchers from Which? Money posed as customers and applied for loans over the phone with 41 different lenders. They found that 24 of the 41 firms included payment protection insurance (PPI) automatically when customers applied for personal loans.

Some lenders quoted both with and without PPI and only one lender did not include PPI on any quotes.

The results were similar for loan applications made on the internet - Lloyds TSB, Tesco and NatWest initially quote with PPI and the borrower has to click through to another page to get a quote without it.

Which? Money said building society Norwich and Peterborough was the clearest on PPI – its website lets borrowers choose at the start of the process whether they want a quote with or without PPI.

There are an estimated 20m policies active in the UK but the insurance is widely regarded as over-priced and seldom effective, and consumers have long-complained that policies were being added to loans and credit cards without the cost being explained. Which? warned that there was a risk applicants could end up with unwanted PPI.

Which? Money editor, said: 'PPI is not always suitable, yet our research shows that lenders are still extremely keen to sell it to us. By adding PPI to loan quotes automatically, people could be tricked into buying it regardless of whether they need it or not. 'If you're taking out a loan, make sure you know if the quotes you get include PPI – it's not compulsory so if you don't want it, ask the lender to remove it.'

15/03/07 : Watchdog hints at scale of PPI rip-off

A significant number of consumers with payment protection insurance (PPI) were not treated fairly when purchasing the product, the City watchdog said today.

In a speech on the state of the PPI market, Stuart King, head of market intelligence and retail themes at the Financial Services Authority (FSA), said evidence reveals that the controversial insurance has not been sold correctly over a 'prolonged period' in a number of cases.

He added that the issue will remain a top priority and the regulator would be relentless in the pursuit of improving standards for the millions of consumers sold PPI.

The product - which provides financial cover for people who find themselves unable to work through injury or ill health - is often sold on the back of loans, credit cards and mortgages.

There are an estimated 20m policies active in the UK. But critics claim that PPI is vastly overpriced, often sold to people who do not need it and difficult to claim on.

As such, the FSA has been involved in an ongoing crackdown on firms guilty of not protecting customers against the risks of being mis-sold the product.

So far it has handed out fines worth £1.6m on companies found to be treating customers unfairly, with more penalties expected to come.

Speaking at the Westminster and City Annual Conference on Creditor Insurance, Mr King said the issue of PPI was important because it affects millions of consumers.

He added that work the FSA had done suggested that 'a significant number' of consumers have not been treated fairly when purchasing PPI.

Work by the regulator had uncovered 'too many' cases of individuals who have been mistreated, Mr King added.

It found instances where a five-year policy with an age limit of 65 was sold to a 68-year-old retiree and where consumers were advised to purchase single premium cover despite telling the lender that they expected to re-finance the debt in the near future.

Firms selling PPI were routinely exposed to have kept little or no records concerning sales, with some selling policies with no obvious process for explaining significant details to the customer.

Mr King said the FSA had seen evidence of improving standards but that shortcoming in the PPI market continued.

'PPI is and will remain a top priority for us and is one of the largest regulatory investigations we have ever mounted', Mr King concluded.