The Financial Services Authority (FSA) has been looking into the issue of Payment Protection Insurance (PPI) and the way that it is sold to people taking out loans in the UK. The list includes many of the UK’s biggest banks and building societies, and it is single-handedly earning lenders over 1 billion a year.
The point of PPI is that if a loan borrower becomes unemployed or unable to work though accident or illness, the loan provider will cover their payments until they return to work. The borrower pays a monthly premium for this insurance, something that around 50% agree to when taking out the loan.
However, some interesting information has come to light, as the Department of Trade and Industry has found that only 4% ever make a claim, and only 75% of those claims meet the terms of the insurance. The lenders themselves are in many ways responsible for this, as the FSA found that around 50% of the lenders surveyed failed to explain the details and exclusions to borrowers before persuading them to sign up. The investigation also found that although lenders were not telling the customers that the insurance was compulsory, they were often adding the PPI to...
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