Which? declare “Credit card PPI is a modern day snake oil”
Despite the torrent of shocking publicity over the past few years, and increased regulatory scrutiny, Payment Protection Insurance (PPI) polices are still being sold extensively.
PPI is designed to ensure that loans, credit card payments or mortgages can still be paid should the customer fall ill or become unemployed.
Credit card cover is the second most common form of PPI and the consumers’ association Which? has claimed that people are still being misled into buying this expensive PPI to cover their credit card payments.
A survey conducted by Which? suggests that around 10 million people have a PPI policy with their cards. Which?’s study of 2000 adults in the UK found that 32% had purchased a PPI policy.
The survey also revealed that as many as 13% – 1.3 million, bought their PPI under the mistaken belief that the PPI was either obligatory or would improve their chances of getting their credit card application approved.
The Financial Services Authority (FSA) has fined 11 organisations in the past two years for mis-selling PPI. The Office of Fair Trading (OFT) has also criticised PPI policies for recurrently exaggerating the level of cover on offer. In June last year (2008) the Competition Commission said consumers were being over charged for PPI because of the lack of opportunity for competition at the point of sale.
Which? have stated on numerous occasions that they believe people were wasting their money buying any form of PPI, but if the customer really felt they required insurance they should always shop around.
Doug Taylor of Which? is quoted as saying, "Credit card PPI is a modern day snake oil – it’s a useless product, expensive and poorly designed,"
"In this time of economic uncertainty, people are effectively throwing away £970 million each year, when they should be encouraged to seek independent financial advice about protecting their finances as a whole," he added.
The British Bankers Association (BBA) rejected this report stating that they believe PPI is a valuable "plan B". The BBA spokesperson also added, “Taking out PPI is not a condition for agreeing to provide the borrowing facility and people are free to shop around if they want to.”
Consumers’ rights campaigners such as Which? and Citizens Advice have been fighting against the methods by which PPI is sold for some time, describing PPI as being “little more than protection racket run by the banks to boost their profits”.
Source: Which