Payment protection may be being mis-sold
07 February 2007
- Payment protection insurance in the spotlight
- Worries over lack of competition and mis-selling
- Big changes could be imposed on the industry
Poor consumer choice, aggressive sales tactics and mis-selling mean the payment protection insurance industry is to be closely investigated.
Payment protection insurance (PPI) aims to cover the cost of loan repayments when consumers are unable to repay - if they fall ill or lose their jobs, for example. It's a highly profitable part of car dealership operations, and in 2005 the industry as a whole was worth £5.5 billion through 6.5 million policies.
The Office of Fair Trading has a number of concerns in referring the PPI industry to the Competition Commission, which will now investigate and can impose changes on how the industry operates.
Principally, the OFT is worried that little competition exists in the industry, and that consumers are paying overly high prices for the insurance as a result.
It also believes that consumers are targeted with aggressive sales tactics, and that the insurance they subsequently buy often provides less protection than had been promised.
If you're tempted by PPI cover, read the small print carefully to see precisely what protection you will get. Don't feel pressurised into making a snap decision at a dealership, and make sure it hasn't automatically been included in a loan that you're being offered.
Some dealers may tell you that you have a better chance of being accepted for finance if you take out PPI, but this is not the case.
Always shop around so that you get the best possible deal.
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