Get Thousands Back From Your Bank
Consumers have been given the green light to reclaim up to £24,000 after a Competition Commission report into loan cover
CONSUMERS have been urged to reclaim as much as £24,000 from their banks after the Competition Commission found last week that borrowers were being overcharged by £1.4 billion for loan cover.
The insurance, which is bought by one in four people and is supposed to cover your mortgage or loan repayments if you are unable to work, is described as one of the last big rip-offs in the industry after endowment mis-selling and overdraft charges.
Banks often add the cover to your loan automatically, with many borrowers never realising they have it. Even when they do, most consumers are unaware of the extent of overcharging.
Mortgage cover from Halifax, for example, would add £103 a month to the cost of a typical £200,000 home loan, or £2,472 over two years. The cheapest cover on the market can cost two-thirds less.
Martin Lewis, of Moneysavingexpert.com, the consumer revenge website, said: “This really is a scandal and I would urge anyone who has got a loan in the past six years to check whether they’ve been mis-sold a policy. This is set to be a bigger revolution than bank charges or credit card fees.
“In one case we have seen, a borrower paid £24,500 for cover on a £100,000 second-charge home loan over 18 months. They got the entire amount back plus interest.”
The commission said banks were selling cover to wealthier customers to subsidise cheap loans for lower-income borrowers who cannot get insurance. It said: “Unprotected customers at lower credit scores may be cross-subsidised by customers purchasing payment protection insurance (PPI).”
Peter Davis, deputy chairman of the commission, said: “We were surprised to find the problem with PPI so entrenched. People with incomes over £50,000 were just as vulnerable as low-income earners.”
Jerry Mumford, of Loxwood, West Sussex, is among them. The 34-year-old, an IT sales director for an American firm, was sold protection from HSBC when he applied for a £25,000 equity-release loan. He has since been refunded £1,186 by the bank.
Mumford said: “I had the impression it was part of the process of taking out a loan. At no point was I ever asked if I had any cover through work. I tried to ask for someone to rationalise our insurance costs. It was almost impossible. We used a very easy template letter and sent off my complaint - they didn’t even try and argue.”
With 14m policies sold alongside mortgages, loans and credit cards, consumer groups said the revolt by policyholders could be bigger than that over bank charges.
Consumers can claim if they were mis-sold the policy - normally because they would never have been eligible to claim, perhaps because they were self-employed or had a pre-existing medical condition.
Lenders use a variety of tricks to sell PPI. Moneyback Bank, for example, offers £200 cashback if you take out its policy.
The commission report said: “Some consumers were under the impression that their credit application was more likely to be accepted if they bought PPI.”