Britons are being overcharged by over £1.4 billion a year from the sale of payment protection insurance (PPI), the Competition Commission (CC) has warned.
The UK watchdog said banks, finance companies and retailers routinely overcharge borrowers due to lack of competition in the PPI market and added that industry price caps may be introduced to curb the current practices.
Concluding a 17-month investigation, the commission said most PPI contracts are sold by lenders with loans and credit cards, making it difficult for borrowers to shop around for a better deal.
"We’ve found serious problems with the PPI market and customers are paying for the lack of competition," commented the watchdog’s deputy chairman Peter Davis.
"The way PPI is sold as an add-on to a loan or other credit product means distributors escape the pressure they should face from competing suppliers."
PPI is insurance that enables borrowers to keep up their debt repayments if they unexpectedly lose their income .
Over 14 million policies have been taken out in conjunction with loans, mortgages, credit cards, store cards and car finance, despite the fact that premiums can be six times more costly than deals available from independent firms .
The commission found that some banks are offering artificially low loan rates, only to hit customers with huge protection payments.
The CC said its investigation into the industry could lead to a cap on excessive premiums and that banks might be barred from selling payment protection as an 'add on' to a loan .
Furthermore, it added that measures could be introduced to improve competition in the market by enabling consumers to compare PPI products and making it easier for them to switch between providers.
UK Consumers Being Ripped-Off On Loan Cover
UK Consumers Being Ripped-Off On Loan Cover
Mon, 09 Jun 2008
Recommended links
Your online loans portalOnline loan quote
Loan comparison tool
Payment Protection Insurance
Personal loans resource
Debt management
Watchdog Reveals Loan Insurance Rip Off For UK Consumers
Company Fined for Sale of PPI Loan Cover
| Online Loans news |
|---|
| Buy To Let Loan Approvals Declining - Wed, 27 Aug 2008 |
| Over 3 Million Borrowers Refused Credit - Fri, 22 Aug 2008 |
| Loan Interest Rates On The Rise - Wed, 20 Aug 2008 |
| More News |