Consumer often unaware that they are buying loan insurance cover
According to a recent survey and report by consumer group Which? consumers in the UK are still being duped into buying payment protection insurance cover when taking out a loan, despite the recent controversy with regards to the mis-selling and the effectiveness of this type of cover.
A mystery shopping exercise was carried out as part of the study, and this revealed that in many cases consumers were not even being given the choice of whether they wanted to take out payment protection insurance cover, because they were not told about it – it was simply added automatically.
Payment Protection Insurance, otherwise known simply as PPI, is supposed to protect the consumers by ensuring that the repayments on the loan or credit are covered if the policyholder falls ill or loses their job. However, there has been fierce controversy over these policies, with regulators stating that they are being sold to people that cannot even benefit from them, and that consumers are being pressured into taking them out through the use of a number of tactics.
Following the mystery shopper study it was found that in twenty four out of forty one cases the lenders automatically added PPI costs into quotes that were provided to consumers, which meant that the consumers weren't even aware that they were paying for protection on their finance. RBS and Natwest were amongst the lenders guilty of automatically adding PPI to quotes provided to consumers.
There were some lenders, such as Nationwide, that provided consumers with two quotes, one with PPI and one without, and just one of the lenders, HSBC, provided a quote without any PPI added. Online surveys were also carried out, and it was found that a number of lenders quoted with PPI online, including Lloyds TSB, Natwest, and Tesco.
Tom Smith
29th May 2007
More Information:
-
If you're taking out a sizeable loan, the idea of payment protection may sound like a good idea. Programs such as these protect buyers in the event that they are unable to make payments on the loan due to events such as layoffs or medical emergencies.
-
Almost every time you apply for a loan or other form of credit, you are asked if you would like to purchase credit insurance. It my even be automatically added to your contract without you noticing.
External Links:
