New attack on lenders over payment protection insurance
THE MAIL ON SUNDAY - 11TH NOVEMBER 2007
Lenders who sell controversial payment protection insurance – aimed at covering borrowers if they lose their income – have attracted more criticism in a damning report by the Competition Commission.
The interim report last week into the £5.5 billion a year market found that many lenders charge more for payment protection insurance, sold alongside loans and credit cards, than they charge in interest.
For each payment protection insurance policy sold alongside a loan or credit card, banks earn up to 80 per cent of the premium in commission. This compares with between 40 per cent to 65 per cent for mortgage payment protection insurance. Payment protection insurance policies sold with loans and credit cards are also up to five times more expensive than standalone cover, sold by providers such as British Insurance or the Post Office.
Financial Mail has long highlighted the mis-selling of payment protection insurance. Earlier this year a report by the Financial Services Authority found two-thirds of firms selling payment protection insurance were guilty of ‘serious failings’.
The FSA is carrying out its own investigation into the payment protection insurance market and says tougher action will be taken against companies found guilty of mis-selling cover. The Office of Fair Trading is also investigating the market. Duncan Caesar Gordon, head of protection at the Post Office, says: ‘If we want customers to trust our industry we must allow for a fairer marketplace.’
The Competition Commission will report in full next May.
