Payment Protection Insurance (PPI) is used as a sort of safety net for those who take out credit cards and other financial commitments.
These additional policies are small monthly payments that are paid to your provider, and are supposed to provide a level of protection should you find yourself in financial difficulty due to sudden unemployment or ill health.
However, PPIs have come under much media scrutiny as of late, and the Competition Commission has recently published a report about the policies. The report was critical of credit cards and loans companies for the way they handle applications and also payments should customers need to claim. Many have reported running into difficulties when having to make a claim against their PPI, with many customers feeling that they've been overcharged for services that were not effective when needed.
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The Commission recognised problems with the sale of PPIs, stating a lack of competition between providers as one of the main reasons for the additional high prices customers face on their bills each month.
With the credit crunch hitting everyone from homeowners to businesses, many consumers are being careful as to what additional policies they sign up for when applying for personal loans and credit cards. And now providers face even more scrutiny from the Financial Ombudsman Service. A recent report has shown a surge in complaints against brokers and banks.
Many of the complaints were on the grounds of mis-selling PPI policies, many cases were investigating and exposed in the mass media - from print to television to online campaigns to tackle the problem. One of the issues identified was that customers were given no choice of potential policies during the application process for loans, credit cards and mortgages.
Many fall into the trap of thinking that taking out such policies will increase the chances of having a loan or mortgage approved.
Some policies are also included as part of the cost of the financial products themselves, and many customers find themselves confused by what the policies actually entail.
The Competition Commission has made suggestions that the marketing and advertising of PPI should be made clearer to customers, explaining the policies and any cancellation options properly and to also give them the option of shopping around for the best policies.
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