Loan insurance with single premiums banned from today

29 May 2009 / by Rachael Stiles

Banks and other lenders are meant to stop selling single premium payment protection insurance on loans and other lending from today.

Payment protection insurance is intended to cover the cost of repayments on loans, mortgages, credit cards, and other forms of lending if the borrower becomes redundant, or sickness or injury means they are unable to work for a temporary period.

The Financial Services Authority has called on lenders to withdraw the product from sale as of today, at the latest.

PPI can provide customers with valuable protection against the unexpected, but lenders have been allowed to sell the controversial single premium PPI, the total cost of which was paid up front, often being added to the cost of the product and accruing interest accordingly.

This often leads to people paying a lot more interest on their debt and it taking them a lot longer to repay the debt than it otherwise would, if they had been offered a plan which allowed for monthly payments of the PPI.

The FSA's request for single premium PPI to be withdrawn followed a report earlier this year into the payment protection insurance (PPI) market, which found many instances of mis-selling, where the lender had sold a customer insurance that was not suitable for them, or had not told them it had been added to the cost of their borrowing.

In its report in to the selling practices of PPI, the Competition Commission banned the sale of PPI from October 2010, but the FSA has called on firms to drop it ahead of this deadline as a result of the ongoing controversy surrounding the way that it is sold.

A growing number of people have successfully reclaimed what turned out to be mis-sold payment protection insurance. The Financial Ombudsman revealed this week that there has been a three-fold increase in the number of PPI claims, and said that 89 per cent of them are found in favour of the customer by the Ombudsman.

If you think you might have been a victim of mis-sold payment protection insurance, fill in our enquiry form and start your claim today.

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