Loan Repayment Watch Those Extras

Loan Repayment – Watch Those Extras!
Following a​ complaint made by Citizens Advice in​ 2018,​ claiming that aspects of​ the​ payment protection insurance (PPI) market were severely harming the​ interests of​ consumers,​ a​ report has been published by the​ Office of​ Fair Trading.
Payment protection insurance is​ designed to​ safeguard borrowers’ ability to​ keep up loan payments and in​ theory it​ should make it​ easier to​ avoid getting into debt .​
If the​ borrower suffers an​ illness,​ an​ accident or​ loses their job,​ then PPI should step in​ and pay out for a​ specified period of​ time .​
It appears that borrowers’ are not being made aware of​ exclusions which may mean that they can’t make a​ claim.
In addition to​ these omissions,​ it​ appears that borrowers’ have no true idea of​ the​ real cost of​ cover and do not receive suitable information on​ the​ product.
What is​ making matters worse is​ that providers are using an​ assortment of​ very different terms for the​ same products.
Not all borrowers need the​ protection that these policies offer .​
Prior to​ taking out the​ loan they would not have considered the​ purchase of​ additional insurance and it​ is​ a​ fact that almost 90% of​ unsecured loan providers automatically calculate the​ cost of​ the​ PPI in​ the​ full figures for the​ loan .​
If you​ apply for a​ personal loan you​ are likely to​ find an​ amount for PPI added to​ the​ bottom of​ the​ calculations and may even assume that this is​ a​ pre-requisite,​ which could be taken as​ misleading.
The Office of​ Fair Trading revealed that the​ variance in​ the​ prices were not relative to​ the​ cost .​
There were cases of​ virtually identical policies costing from £16 to​ around £40 .​
Product providers seem to​ be doing very well out of​ selling the​ cover,​ with the​ cost of​ claims showing as​ a​ very small proportion of​ the​ annual income of​ £5 billion which they receive from premiums.
In the​ PPI industry as​ a​ whole,​ the​ Office of​ Fair Trading was not happy with regards the​ provision of​ clear information on​ PPI prices,​ although this was not totally the​ case .​
It was commonly found that marketing literature was on​ display without any indication whatsoever of​ costs.
When taking out a​ loan,​ 25% of​ borrowers’ had the​ mistaken impression that by taking out a​ payment protection plan,​ their application for credit would be viewed more favourably .​
Sales agents earn a​ considerable income from the​ sale of​ the​ product and commission of​ 60% of​ the​ product price is​ common.
An amazing 7.5 million PPI policies are sold every year,​ despite the​ fact that they are unsuitable for a​ great many borrowers’ and many of​ them are incredibly expensive.
A feed-back session on​ the​ Office of​ Fair Trading report is​ being held .​
Further action is​ then expected and this is​ very likely to​ result in​ them offering encouragement to​ companies to​ improve the​ product which they offer to​ their clients .​
Plans are then likely to​ be put in​ place for a​ code of​ conduct .​
These moves would be on​ a​ voluntary basis.
In the​ event of​ companies not complying with whatever moves are proposed,​ it​ is​ possible that a​ full investigation and recommendations could be handed to​ either the​ Financial Services Authority or​ to​ the​ Competition Commission.
In the​ meantime,​ remember that this is​ a​ purely voluntary form of​ insurance .​
Cover for accident,​ illness or​ loss of​ job can be found in​ other forms .​
Indeed it​ is​ likely that many borrowers’ who have paid for this expensive cover are already amply insured via other products.
Check the​ facts carefully .​
It’s your money.

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