14 September 2005
Borrowers have been advised to avoid taking too much insurance on their loans because of fears that such insurance could be unnecessary or even bogus.
Burgesses, a UK payments protection service, says that people have been paying out around £1,000 more than they should be after buying inappropriate products.
In a statement, the company said that "major lenders are breaching FSA [Financial Services Authority] rules by employing mis-leading sales techniques in order to persuade borrowers to sign-up for expensive, front loaded mortgage, income and loan protection insurance cover, designed to protect against unemployment, disability and death".
Simon Burgess, managing director of Burgesses, said: "The findings reveal that banks continue to profiteer from selling this product and that people are paying a heavy price for failing to shop around.
"They are succumbing to underhand tactics often used by banks, which include adding the cost of cover to the loan without necessarily telling people they have done so."
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