BBC

New online help for PPI customers

People who want to buy payment protection insurance (PPI) can now get advice from the website of the Financial Services Authority (FSA).

The watchdog has launched a set of tables to help consumers compare the policies on offer and their cost.

PPI insures people in case they cannot repay loans due to ill health or job loss, and has proved controversial.

This month the Competition Commission said insurers were overcharging their PPI customers by £1.4bn a year.

A spokesman for the FSA said that the tables were "a starting point to give customers basic information about what the polices offer and what they cost".

"PPI is almost always optional and consumers need to consider their own financial circumstances when deciding to purchase it and make sure they are clear about what will be covered," he added.

Complaints

The selling of PPI has been very controversial for several years, with critics such as Citizens Advice describing the industry as a "protection racket".

Insurers have been accused of selling polices that are too expensive and which may even fail to provide the cover they claim to offer.

The FSA has levied numerous fines on financial companies for mis-selling PPI policies.

And the Competition Commission even suggested that to protect customers it might impose temporary price limits and ban firms from selling PPI policies to customers at the point at which they take out a loan.

In the last financial year nearly 11,000 people complained to the Financial Ombudsman Service about the PPI policies they had bought, making the insurance one of the fastest growing sources of complaint.

Comparisons

PPI still mis-sold, says Which?
BBC
Many people are still being misled into buying payment protection insurance (PPI) to cover their credit card payments, Which? claims.
A survey for the consumers' association suggests that nearly 10 million people have a PPI policy with their cards.
But 13% - 1.3 million - bought it under the mistaken belief it was compulsory or would improve their chances of having their card application approved.
Which? said people were wasting their money buying any form of PPI policy.
"Credit card PPI is a modern day snake oil - it's a useless product, expensive and poorly designed," said Doug Taylor of Which?
"In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole," he added.
This was rejected by the British Bankers Association (BBA), who said the insurance was a valuable "plan B".
"Taking out PPI is not a condition for agreeing to provide the borrowing facility and people are free to shop around if they want to," a BBA spokesperson said.
"Last year, a mystery shopping exercise carried out by the FSA showed improvements in staff making it clear to customers that cover is optional and new rules which came into force in July tighten the PPI regime even further," the spokesperson added.
PPI is designed to ensure that people can still repay their loans, such as credit card payments or mortgages, if they fall ill or become unemployed.
Criticism
Consumer bodies such as Which? and Citizens Advice have long campaigned against the selling of PPI, describing it as little more than a protection racket run by the banks to boost their profits.
In June this year the Competition Commission calculated that customers were being overcharged for the insurance policies each year because of a lack of competition at the point of sale.