Loan Payment Insurance Costing Consumers Billions

Tue, 10 Jun 2008

The Competition Commission have released their latest report regarding Payment Protection Insurance . The watchdog’s latest findings have confirmed that the insurance is unfairly costing the public £1.4 billion a year due to banks overcharging their customers. At present, Payment Protection Insurance is sold as an add on to the loan costs, though the watchdog is trying to secure the introduction of a cap on high premiums, and change the way it is sold so that banks include only the actual cost of the insurance as part of the loan rather than as an expensive add on.

PPI is sold to customers as a form of insurance against illness or redundancy, with the insurance subsequently covering the cost of the missed payments. To date, more than 14 million policies have been taken out alongside loans, mortgages, car finance and credit cards, with premiums as much as six times more than independent firms would charge. A £7,500 loan can bring PPI charges of nearly £3,000, compared with the fee charged by specialist firms which is under £500. However, a major problem is that many customers aren’t aware that such cover is provided by specialist firms and go for the expensive option offered by their bank .
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