Banks in £5bn rip-off
THE PEOPLE - 18TH FEBRUARY 2007
If you have taken out a loan lately you could have been tricked into taking rip-off insurance.
The big banks have been flogging payment protection insurance with loans, mortgages and credit cards.
They make an estimated £5billion a year from pushing the cover. But the policies they sell are expensive and often useless.
The Competition Commission has launched a full-scale investigation after Office of Fair Trading chief John Fingleton said: "Consumers get a poor deal. There are features of the market which restrict competition."
And the banks may be banned from making excessive profits through pushing the cover.
Payment protection insurance is supposed to pay out if people lose their job or fall ill. It should cover the cost of repaying their loan. But exclusions mean many people cannot claim - making the cover useless.
If your lender or credit card company tries to make you sign up for loan insurance say NO.
If you want the peace of mind of knowing your mortgage or loan would be repaid in full if you fell ill or couldn't work then go to an independent broker.
They will be able to ensure you are eligible for cover - and the premium could be a tenth of the loan provider's price.
According to British Insurance, a 30-year-old taking out loan protection with the Royal Bank of Scotland would pay £25 per £100 of cover. The same cover could be brought through a broker at just £3.25.
Shane Craig of Paymentcare said: "It's essential people are made aware there is an affordable alternative and payment protection insurance doesn't have to be bought along with a loan, store or credit card."
Get a quote at www.britishinsurance.co.uk (0870 240 3946)
Case Study
Lisa Green likes catalogue shopping because she can spread her payments.
Lisa, 25, spent £300 with Littlewoods last year and did not realise she had agreed to payment protection insurance.
The customer services adviser said: “I like using catalogues as you can pay it back over a number of weeks. But it wasn’t until I looked at my statement that I realised I had been charged £6 a month for accident, sickness and unemployment insurance. I believe I was misled into taking out the cover.”
Lisa, of Braintree, Essex is planning to challenge the catalogue company.
Littlewoods said: “Cover is selected by the customer on an “option” basis. It’s only applied if they agree.”
