The outrageous payment protection insurance that had 42.5% interest charge
- 4TH MAY 2007
Months after the Financial Services Authority announced a probe into payment protection insurance (PPI), the rumblings of consumer discontent can still be heard against the financial industry. With the media highlighting certain extreme cases, it is no wonder that consumers are outraged.
The This Is Money website recently drew attention to a specific case that saw one young lady paying triple the asking price for a £7,080 car as a result of being told by a loan company that she had to take payment protection insurance before they would offer a credit agreement, as well as several other add ons.
The payment protection insurance premiums cost £3,228, but were subject to the 42.5% interest rate on the loan because it was added to the total amount borrowed. The total payment protection insurance cost was therefore a staggering £8,957, almost triple the original cost of the policy!
Although the lending company was within their rights to sell payment protection insurance, it failed to tell the consumer that she had other options and could have bought the cover independently and at a far lower price.
Standalone payment protection insurance from the ethical British Insurance, for example, would have covered her agreement as well as saving her up to 80% over the 62 months of her agreement.
A number of lending companies and high street financial institutions have received fines as a result of misleading the consumer by not informing them of their payment protection insurance options. It is therefore be prudent to investigate the option of a standalone policy before applying for credit in the future.
