Consumers are advised to be vigilant when shopping for personal loans, in order to avoid paying for “unwanted” insurance products.
Recent information drawn from a comprehensive study, conducted by a best buy website, has discovered that an alarming amount of personal loan providers are tagging PPI to loan plans without direct consent from the customer. Two of the UK’s most respected and well-known lenders have been caught red handed, attempting to bundle insurance into plans during an undercover “best practice” exercise.
The company responsible for conducting the research approached forty personal loan providers under the guise of a typical customer. Accordingly, payment protection insurance was added to plans in over half of all instances, without the prior consent, or indeed knowledge of the customer.
PPI has been the cause of much controversy recently, with news of one of the largest secured loan brokers in the country falling foul of official guidelines, and being slapped with a hefty fine as a result. The UK’s financial watchdog (the FSA) has announced plans to closely monitor the sale of such insurances by financial institutions, and has assured consumer groups that mis-selling will not be tolerated.
The purpose of loan insurance is to protect the customer should they happen to suffer financially during the term of the loan. In such an event their commitment will be taken care of by the policy. However, a number of consumer groups have argued that many people are sold the insurance without having any real need for it, and without understanding the actual benefits. PPI can be expensive and is likely to massively increase the actual loan repayments. Many believe that consumers who are mis-sold such insurances suffer financially, as a result.
