Payment protection insurance probed

Fri, 09 Dec 2005

OFT).

An inquiry has been launched by the OFT into payment protection insurance, following a complaint lodged by Citizens Advice.

The charity claims that the selling of payment protection insurance is "a protection racket".

Payment protection insurance is sold to people taking out a mortgage, a personal loan or a credit card and is designed to cover repayments if the borrower falls ill or becomes unemployed and can no longer afford repayments.

However, a report in September by Citizens Advice said that payment protection insurance fails those who need it most, by increasing their debt.

The OFT's planned investigation has been praised by Citizens Advice.

"People buy payment protection insurance because they are looking for peace of mind," says Teresa Perchard, the director of policy at the charity.

"Given the scale of borrowing in the UK and the amount of money consumers spend on payment protection insurance, it is vitally important that they get a product that gives them this and meets their needs at a fair price," she says.

Payment protection insurance could double the cost of a mortgage or personal loan, consumer watchdog Which? revealed earlier this year.

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