The sale of payment protection insurance alongside credit is to be banned in 2010.
Research has shown that customers can save thousands of pounds by shopping around for PPI, a policy which covers repayments should the policyholder become unable to.
However, many lenders have been pressuring customers into taking out their own extremely expensive cover along with a loan or credit card.
The Competition Commission (CC) has decided point of sale PPI is anti-competitive, and ruled that lenders must wait at least seven days from the time a customer takes out a line of credit before trying to sell insurance to them.
Point of sale PPI is wonderful – for banks
Selling PPI alongside a loan has proved an extremely profitable venture for banks, which can pocket as much as £1,200 from a policy that costs them just £20.
Perhaps unsurprisingly, the lure of such massive profits has proved too much for some banks, and mis-selling of policies has become commonplace.
Two of the most popular tricks employed by banks include wrongly implying that PPI is mandatory when taking out credit, or selling a policy to a customer who has no chance of making a claim.
PPI not always bad
Yet despite its bad reputation, PPI is by no means a terrible product. In fact, with unemployment at 1.92 million and rising, the argument for covering any existing debt is stronger than ever.
The golden rule when looking for a policy is to always shop around, making sure you include independent providers in your search as these can cost a fraction of their high street rivals.
For example, cover for a £10,000 loan over four years will cost you a total of £415 at British Insurance.
However, automatically tack PPI onto a loan at Alliance & Leicester and your cover will cost you £2,697 – that’s over six times more.
