Vincent Cable, Liberal Democrat shadow chancellor, today announced his backing for Paymentcares campaign to persuade the Office of Fair Trading to direct high street providers to label their payment protection policies with a clear warning to consumers.
Shane Craig, managing director of Paymentcare, says: “We are delighted to have the support of Vincent Cable in this important campaign.
“Cable has himself campaigned tirelessly on behalf of consumers who are constantly being ripped off by the major lenders. We want consumers to be clear that they are under no obligation to buy the cover when taking out personal loans – something the banks and loan companies that push expensive PPI agreements are reluctant to see introduced.”
Cable argues that given the historically high levels of personal debt in the UK, it is important for borrowers to protect their ability to repay should they lose their job.
He says: “Because the major lenders are being so greedy and loading premiums, ordinary borrowers are fearful of being ripped off.
“There is a place for affordable loan payment protection, and there is a genuine case for tighter regulation of the way it is sold by the major providers who have dined out on it for so long.”
Currently, the OFT and the Department of Trade and Industry are locked in dispute over the inclusion of a clear statement on all PPI agreements, stating that the cover is not mandatory.
Craig says: “The watchdog needs to move fast on this important legislation, and at the moment it looks as if a major barrier to protecting consumer interests is a breakdown in dialogue with the DTI.
“The two need to agree on a common plan before proper legislation can become enforced, and we will continue to campaign tirelessly until this is the case.”
At present, providers do not have to display any such warning information to consumers. Paymentcare is therefore concerned that individuals are vulnerable to being mis-sold the cover.
Craig adds: “We aim to highlight the need for further transparency in the PPI market and we also fully support the Financial Services Authoritys recent secret shopping campaign to flush out mis-selling.
“Our own research confirms that the mis-selling scandal of loan protection insurance is a continuing problem. Consumers are entitled to be sceptical of PPI policies when they realise that the high street banks and lenders have been taking advantage and ripping them off for years.”
In light of recent concerns, raised by the Citizens Advice Bureau, about the potential mis-selling of PPI by major high street providers, and significant press attention into the high charges levied by lenders for their PPI policies, Paymentcare has called on the OFT to make several assurances.
Firstly, that credit agreements state clearly and categorically that PPI is not conditional on the loan being granted.
Additionally, the selling of single premium policies is banned outright. This is where insurance premiums for the duration of the loan are added to the amount borrowed and then interest is charged on both the loan and insurance.
Finally, it should adopt the system that applies in certain US states where lenders are not allowed to cross-sell insurance at the point of sale, thereby allowing consumers the opportunity and time to reflect and research what products are available that best meet their needs.