5 April 2006
The switching and comparison website uSwitch.com has welcomed the Office of Fair Trading's (OFT) announcement that it is to begin an in-depth study of the loan protection insurance sector, adding that the move was "long overdue".
It calculated that consumers could be paying as much as an extra £4,453 when they take out payment protection insurance (PPI) on a £10,000 loan.
Taking PPI out with banks can inflate consumer costs by 694%, uSwitch.com said.
"We hope that this is the first real step towards introducing the necessary changes to the way PPI is sold to consumers," said Nick White, head of personal finance at uSwitch.com.
"At the moment, the willingness of providers to promote PPI can lead to policies being mis-sold to consumers. Many are under the mistaken belief they are getting the best rate, or that by simply taking out this product they may be more likely to be approved for a loan. Alarmingly, there are some consumers who don't even realise they have been sold PPI."
He also had some advice for consumers.
"Consumers who take out PPI with their loan, need to be conscious that the APR increases once PPI is added to the loan amount - in some cases this can be by as much as 16.3%," Mr White said.
He added: "They should always ensure they understand what is covered by reading the small print, and that the policy meets their requirements, whilst ensuring that they do not over-insure. For example some policies automatically include life cover, but this could be doubling-up on insurance as the customer may have their own life policy."
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