WEALTH WARNING – LOAN & CREDIT CARD SCANDAL; Payment Protection Insurance – is this the biggest “Bank Robbery” in history?: ADVERTISEMENT FEATURE

Evening Chronicle (Newcastle, England), Oct 5, 2009

Payment Protection Insurance (PPI) policies are designed to cover the cost of loan or credit card repayments in the event that the customer is off sick from work or has become unemployed. However, Renaissance Easy Claim, a leading financial complaints company, is warning that many people were sold policies they didn’t want or need and so could be due compensation.

Andy Humphries, Managing Director of Renaissance explains, “The main problems with PPI are that many people don’t really need the policy they have; the numerous exclusions on the policy mean they may not be able to claim at all; and that the benefit is restricted to a set period of time -usually 12 months. Many customers did not even know they were being sold the policy, or thought they had to have it to get the loan or credit card.

“In 2005 the Citizens Advice Bureau (CAB) estimated there were 20 million policies with around 7 million new policies being sold each year. That means, on average, each household in the country has one of these policies.

“In their report, the CAB identified what they said to be widespread mis-selling and consumers paying over the odds for the policies, with only 15% – 20% ever making a claim under the policy. Little wonder they called their report ‘Protection Racket’!

“It’s been estimated that about 60% of PPI policies were related to personal loans and most were sold by the high street banks and building societies. A typical premium, for a 5 year loan of pounds 10,000, was over pounds 2,000. As this was normally charged as a single premium and added to the loan, the banks would charge interest on it as well. That could take the total cost to pounds 2,500 or more. Even if someone was unfortunate enough to need to make a claim because they lost their job, but fortunate enough to escape the exclusions on the policy, then the cover would typically only cover the loan repayments for a year. If they claimed for a full year, the repayments may well have been less than the total cost of the policy. My own view is that if people really had understood the costs relative to the restrictive benefits, very few if any at all, would have taken the PPI.

“With bank staff being set targets for selling PPI alongside loans it is little wonder that many people felt hurried into taking it up under the impression they had to buy the policy, or were left thinking that taking out PPI would improve their chance of getting the loan. If a customer had shopped around for a policy they could usually have found cover at a fraction of the price.

“PPI is also sold alongside credit cards. The policies are designed to cover repayments to the credit card company if the customer is out of work. Again, we find many people don’t know they had it or that they had to have the policy if they wanted the card. Many others don’t appreciate that the policy usually only covers the minimum monthly payment on the card.

“Whether related to a loan or credit card, the policy should have been fully explained before purchase. If it was not then it may have been mis-sold and compensation could be due.

“The Financial Services Authority (FSA) has on several occasions over the last few years expressed concerns over Payment Protection Insurance. In September 2007 it announced the results of its latest mystery shopping exercise. Despite previous warnings, a large number of lenders continued to fail to meet the FSA’s selling standards. At the end of 2008, Alliance & Leicester and Egg became the latest on the list of institutions to be fined
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