Shoppers ripped-off by PPI costs
The competition watchdog has found that the cost of payment protection insurance (PPI) alongside retail loans for catalogue items such electronics or furniture is still too expensive.
The Competition Commission believes that the sale of retail PPI, which covers the payments the sale of goods particularly through home shopping catalogues, is uncompetitive and unfair.
As part of its investigation into the PPI market as a whole, it found that customers who purchase retail PPI are prevented from considering the whole cost compared with other products. The watchdog also claimed that policies were not clearly explained in advertisements, and that once PPI was purchased it was difficult to switch providers.
"As with other types of PPI policy, retail PPI is highly profitable for distributors, and there is little competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products and a considerable point-of-sale advantage for the providers," the Competition Commission said in a statement.
Home shopping retailers do not generally have a high street presence and sell mainly clothing, gifts, furniture and electrical goods through catalogues. Orders are placed by telephone, post or, increasingly, over the Internet. The Competitive Commission’s investigate discovered that the average balances for customers with retail PPI are typically between close to £100 and £400 per month
The Commission says it is now considering ways to allow customers to better understand and compare retail PPI with alternatives, and to switch between providers more easily.
“PPI is currently our most complained about product,” says Emma Parker, a spokeswoman for the Financial Ombudsman Service, which deals with complaints relating to PPI. “It accounts for over a quarter of all our incoming cases, so we are watching the Competition Commission’s work with great interest.”
Last year around £73 million was paid for retail PPI, while single premium PPI - which covers loans and credit cards - raked in £4.5 billion.
Payment protection insurance is designed to cover you should you fall ill, have an accident or lose your job and can’t make repayments on loans or credit cards. However, research by consumer watchdogs found the cover to be overpriced, filled with exclusions (policies exclude self-employment, contract employees and pre-existing medical conditions) and were often mis-sold because the exclusions were never fully explained. In May 2011, the High Court ruled banks had knowingly mis-sold PPI and ordered them to compensate around two million consumers.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.