Although the subject of loan insurance, otherwise known as Payment Protection Insurance or PPI, has been at the centre of heated controversy for some time, this product still continues to attract complaints from customers and concerns from a variety of industry professionals. In fact, the UK’s financial regulator, the Financial Services Authority, and the Financial Ombudsman Service are continuing to crack down when it comes to PPI, having already imposed sky high fines on some lenders and companies that have been found to have been mis-selling this form of cover.

PPI is offered with financial products such as loans, credit cards, car finance, etc. The purpose of the cover is to provide peace of mind for the consumer, who is told that in the event that they are unable to make repayments on the loan or finance due to sickness, redundancy, or accident the repayments will be covered for a set period of time, giving them time to get back on their feet.

However, concern arose when it was discovered that some lenders or providers were selling PPI to those that did not even qualify for it, and in some cases were either hard-selling this costly cover or were adding it without the knowledge of the consumer. Over the past couple of years authorities have been addressing such issues in relation to PPI, and regulations over the sale of PPI have become far more stringent.

Recent reports indicate, however, that the FOS is still receiving around five hundred complaints a week in relation to PPI, and this has prompted a further probe by the agency. The FOS has now written to the FSA in order to get a more indepth investigation underway, and has expressed concern that many lenders and providers are failing to take problems and issues relating to PPI sales seriously enough.

There are concerns amongst FOS officials that the PPI market, which is said to be worth £5.5 billion a year, is getting out of control, with around two million people thought to have been mis-sold this type of cover over the past five years. Even the Competition Commission has become involved in the issues relating to PPI sales, yet even with three major authorities in the financial world involved in this clampdown the issues and problems continue to arise.

Industry watchdogs have also raised concerns over the fact that some customers have been led to believe that PPI is compulsory, when in fact it is totally optional. Around 1.3 million people are thought to have taken PPI with credit cards under the impression that they had to take out the cover in order to get the credit that they wanted. Past investigations have shown that this is the impression that some lenders have been giving to customers without actually saying as much.

It is thought that if the FSA does decide to investigate PPI further this could result in an industry-wide review and could result in forced changes to the sale of PPI.

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