There are people that have opted to take payment protection insurance for a mortgage or a loan, are at risk of being charged far too much. The Competition Commission have been compiling a report, and they reckon that there is not enough competition within the market, and that the financial institutions that are providing PPI are charging whatever they like.
As well as this, consumers appear totally oblivious to the fact that they need to shop around for this type of thing, prior to paying for anything. A lot of people are so blinkered by the ostensible trustworthiness of the financial institutions, that they do not realise that they do not have to take out payment protection with the same company that they did the borrowing from. Did you know that?
The market for PPI is a big one and ranked at around 1.4billion per year. This is a large amount and it comes as no surprise when you realise some of the grossly inflated charges that people are being hit with. A PPI from a broker that is not linked to your borrowing by the bank that you took your borrowing with is far cheaper. An independent PPI is going to cost you around 3 pounds for every 100 that you borrow. The PPI that you will be asked to take along with your borrowing is going to cost an average of 28 pounds for every 100 that you borrow, which certainly is an alarming difference.
It is not enough for the banks to be ripping people of in this way, as they also want to make even more money by selling the policies to people that are never going to be able to make claims. The reason that people take PPI is because they want to be covered if they find themselves out of work, be it through redundancy, illness or otherwise. The problem is that the clauses attached to the majority of policies make it extremely difficult to make any sort of claim. This is why it is so important to read the fine print with the PPI policy that you receive, as it is potentially worth absolutely nothing, even though it could be costing you thousands. Another downside with PPI, as if there were not already enough, is the fact that it is generally subject to a single figure premium that is added to the cost of the borrowing, and therefore subject to interest charges.
Because of the massive amounts of people that have been contacting the Citizens Advice Bureau, in regard to the poor way that PPI has been sold to them, and the way that it is jeopardising their finances, a complaint of considerable magnitude has been made to the Office of Fair Trading. It was around this time that the Competition Commission got involved, and looked into the market. The report that they have been working on for the best part of two months is due to be completed soon, and it is expected to have some reasonable recommendations that will work in the favour of the consumer. It is likely that a temporary limit is going to be introduced, so that banks can only charge a certain amount for PPI. Another likely suggestion is that the companies that lend money will be made to tell the consumers that they do not have to take PPI with borrowing, and that if they shop around they will be able to obtain it in a drastically deflated cost. It may also be the case that the financial institutions will be forced to put the price of their PPI policies within their advertising. If all of these devices are implemented, then the market should become one that is far more consumer friendly, and obviously one that is far cheaper.
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