Banks Face Ppi Crackdown
Banks and credit card issuers will no longer be allowed to get away with payment protection insurance ‘daylight robbery’
The Competition Commission has signalled a major clampdown on unfair credit card and loan insurance deals which will affect most major banks ands lenders.
Practices such as pressurising customers into purchasing insurance cover and confusing customers with complex and confounding terminology will be stamped out. Payment protection insurance (PPI) policies will also be made easier to compare with each other.
These moves were welcomed by the Citizens Advice Bureaux (CAB), which has monitored the difficulties expensive PPI has plunged bank customers into for some time.
"Only 20% of customers made a claim on their insurance last year, with figures for credit cards falling to 11%" A spokeswoman for the CAB had the following to say: "PPI is over-expensive and often unsuitable. Lenders are ripping off, rather than looking after, their customers."
Inquiry Chairman Peter Davis pointed to a lack of competition between banks limiting customers’ PPI options: "The way PPI is sold as an add-on to the loan or other credit product means distributors escape the pressure they face from competing suppliers"
He continues: "Banks, which have constructed a complex form of insurance, fail to compete on either price or quality."
Only 20% of customers made a claim on their insurance last year, with figures for credit cards falling to 11%. Chris Eagle, Commercial Manager at Credit Choices, has been aware of these practices for some time: "Banks make millions from this PPI racket. The customer is lured by banks into believing PPI is part of the credit card or loan package, when in actuality it is very much a separate entity, and in the hands of the applicant to pick and choose."