Case for OFT investigation into payment protection insurance now overwhelming, says Citizens Advice
4th November 2005National charity Citizens Advice today renewed its demand for an Office of Fair Trading (OFT) investigation into payment protection insurance (PPI) following the release of damning findings from a Financial Services Authority (FSA) probe into PPI sales.
It said the findings of a mystery shopping probe by the FSA, showing that poor sales practices were common and widespread, confirmed the conclusions of its own report, Protection racket, published in September. This report formed the basis of a 'super complaint'to the OFT from Citizens Advice.
The OFT has until December to decide whether to investigate.
The Citizens Advice report argued that payment protection insurance was failing many of those who need it most, adding to their debts instead of protecting them against hard times. In many cases it was more about providing an additional source of profit for the financial industry than about protecting consumers.
Based on evidence from 270 Citizens Advice Bureaux around the country, Protection racket showed that the insurance sold to cover credit payments in the event of illness or job loss is often very expensive, mis-sold to people who cannot possibly claim on it, and designed to exclude many of the most common situations that can lead to debt problems.
Citizens Advice Head of Social Policy Dan Vale said:
"Selling PPI is big business, and this insurance does not come cheap, so it is high time the industry developed good minimum standards of cover. We badly need an official investigation of how this market is operating, leading to effective regulation that ensures a fair deal for all consumers, and which also protects the most vulnerable.
"The FSA report highlights the extent to which poor sales practices are endemic within the industry, and the extent to which incentives are leading to mis-selling. It confirms many of the problems we have highlighted, including inappropriate sales and very poor information on cost and cover.
"But the FSA report does not deal with all the issues, namely the cost of PPI and the content of policies. That is why, with increasing independent evidence of market abuse, the case for an OFT investigation is now overwhelming.”
Citizens Advice also urged people with payment protection insurance to check their policies and seek a refund if they believed they had been mis-sold.
The FSA study found that around half the firms they contacted 'failed to take reasonable steps to ensure that customers did not buy policies on which they could not claim, or which provided only very limited cover.'
"People need to check their policy,"
said Dan Vale.
"They should get a copy, read it carefully, and ask themselves whether or not they would be able to make a claim if anything went wrong, paying particular regard to any age and health conditions in the terms of the policy. If, having done this, they think they may have been mis-sold payment protection insurance, they should complain to the firm concerned and ask for a full refund."
Last updated: February 22, 2007