Investigation uncovers loan cost woes
Those who are considering taking out a personal loan in the near future should take note of the findings of an investigation carried out in Suffolk.
Research has revealed that consumers across Suffolk are being left out of pocket by hundreds of thousands of pounds each year costly and often unnecessary insurance policies.
An undercover investigation by Suffolk Trading Standards has revealed “appalling” sales techniques used by many of the high street banks selling personal loans.
The research was prompted after figures showed complaints regarding consumer credit in Suffolk had risen by 100 per cent in five years, with an average of almost four a week at present.
A considerable amount of these complaints involved Payment Protection Insurance (PPI), which is sold in conjunction with either personal loans or other finance deals to protect repayments if the customer is unable to make repayments due to job loss or illness.
According to Suffolk Trading Standards, many banks are automatically attaching the insurance to personal loans without informing the customer that they actually have a choice as to whether they want to buy it or not.
One such complaint saw a Suffolk customer faced with a £10,000 bill on top of a personal loan, for insurance that he was unaware he had purchased.
In many cases the bank will earn more from the insurance than the interest from the loan itself. This often leaves customers with hefty bills for a product they may not require.
The results of investigations on eight banks in Ipswich shocked Trading Standards officers.
Mathew West, Trading Standards’ lead officer for consumer credit, said: “Every single bank without exception did not represent the true cost or financial commitment to the insurance.
“ I was shocked to see there was such widespread problems and so many issues. People are being told it’s compulsory when it’s not.
“They are being told it’s cheap when it’s not. They could have saved money and got insurance somewhere else.
“Every single bank we visited automatically included the insurance in the quote. For example if you said you wanted a £2,000 loan over five years they would give you a quote of ‘X’ amount per month. That quote would include insurance but they will not necessarily tell you. Only when you ask what happens if you lose your job do they make you aware of it.
Consumers should not feel that they do not have to take out insurance on a loan but to ask the loan provider whether the quote hey have been given includes insurance or not.