The Office of Fair Trading has launched an investigation into payment protection insurance (PPI) sold with loans and credit cards.
The investigation was launched in response to complaints by the Citizens Advice Bureau, which claims that (PPI) is mis-sold, overpriced and difficult to claim against.
The policies are intended to cover loan payments in situations where for whatever reason a borrower has been left unable to pay.
There are currently more than six million PPI policies in the UK and at the last estimate the market was worth around £5.4 billion in 2003.
Consumer rights group Which? welcomed the OFT announcement.
“Which? has been saying for many years that the payment protection insurance market is seriously flawed,” said Emma Bandey of Which?.
“There are problems with how the products are sold and how the market itself is set up so we are pleased that the OFT will be conducting this study and look forward to contributing our evidence.”
Critics’ main concerns are that the policies are being sold by staff with no training or knowledge of the product.
Documented mistakes in the past include the sale of PPI to individuals with medical conditions which automatically invalidated the policy.
PPI charges are also often added to the loan interest rate, denying borrowers a chance to accurately compare loans and alternative PPI policies.
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