Citizens Advice response to the Competition Commission report on Payment Protection Insurance (PPI)

05-06-2008

Citizens Advice Director of Policy Teresa Perchard said:

“We very much welcome today’s report published by the Competition Commission which confirms what we said in our ‘super-complaint’ that triggered the original investigation,* that PPI is over expensive and often unsuitable and that lenders are ripping off, rather than looking after their customers.

“While borrowers are trying to be responsible and seeking peace of mind by taking out PPI policies, many people are pushed into debt by the extra PPI costs.

“We therefore welcome the proposals in the report and call on the industry to address issues of cost and quality as a matter of urgency to ensure that PPI starts to protect people without further delay.”

In September 2005 Citizens Advice made a ‘super complaint’ to the Office of Fair Trading, calling on them to launch an investigation into the payment protection insurance (PPI) business, which at that time had an estimated 20 million policies in force and produced annual revenue in excess of £5 billion.

*Protection racket – CAB evidence on the cost and effectiveness of payment protection insurance the report on which the super complaint was based, is available on the Citizens Advice website: www.citizensadvice.org.uk/campaigns/protection_racket

Recent cases:

A couple took out a secured loan which included payment protection insurance. The CAB obtained a transcript of the phone call when the loan was taken out and at no point in the conversation did the person selling the loan mention that the loan was variable and the cost of the PPI was £21,000 on top of the loan. They were sent documents to sign stating that the loan was for £85,000 which they signed and sent back, and 4 days later the loan money was deposited into their account. They then received the loan agreement which stated that the insurance would be on top of the loan and this made the loan with this insurance £106,207.50 in total. When the client had to stop work because of ill-health and tried to claim on the PPI she was told that she could not claim for sickness, only her partner was covered. The loan company have refused to refund the PPI. The client has had to take a lower paid job because of illness, and now she and her partner may lose their home and still owe money when it is repossessed. The worry has added to the client’s health problems.

A married man of 47, a homeowner who is employed full-time, took out a secured consolidation loan for £60,000.00 with an additional loan for £15,000.00 for Payment Protection Insurance in case he lost his job, or suffered ill health. He didn't realise that the PPI was only for 6 years, despite the term of the secured loan being 20 years. The CAB adviser comments that the PPI cover seems inappropriate, excessive and does not appear to meet cleint's needs and some of the terms also appear to be unfair as he will not be covered for 14 years after his PPI expires, but he cannot arrange other cover or cancel the PPI as he would only receive 25% of the premium back if it is cancelled within 12 months of taking out the loan. The addition of the PPI premium has increased his indebtedness by £15,000 for little discernible benefit.

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