Two more years of PPI rip-off looming

Even though the Financial Services Authority (FSA) has been looking at the payment protection insurance (PPI) industry for two years and the Office of Fair Trading (OFT) has spent 15 months doing the same, it could still be 2008 until serious action is taken.

In the meantime, the banks continue to make huge profits from charging inflated premiums on their PPI products.

Since the late 1990’s, consumer groups, newspapers and industry experts like Simon Burgess from independent PPI provider BritishInsurance.com have been highlighting what we know now – that the real cost of PPI is just a tiny fraction of what the banks are selling it for.

Even if the proposal by the OFT to refer the PPI industry to the Competition Commission comes off, we will have to wait another two years before we see any important changes implemented.

PPI provides cover for credit repayments should a borrower become unable to work, due to accident, sickness or unemployment. Around 7m policies are sold every year, accounting for 20% of banks’ profits.

Burgess, a staunch campaigner for fairer pricing and more transparent policies says: "Despite their criticism, high street banks and building societies are unlikely to change their practices until decisive action is taken.

"Until this happens, thousands of consumers will continue to get a raw deal from a market which should be their last line of financial defence."

In the meantime, Burgess urges borrowers not to be sucked in to buying PPI from their lender as an add-on when taking out a loan, credit card or mortgage.

"Consumers can save hundreds, if not thousands of pounds, by shopping around
and not accepting the cover offered by their lender” he says.