THOUSANDS of borrowers continue to be mis-sold loan insurance despite previous warnings about the practice.
The Financial Ombudsman Service (FOS) has revealed that it receives over 500 complaints a week about payment protection insurance (PPI), a ten-fold increase in just two years.
The FOS has called on the Financial Services Authority to clamp down on the mis-selling of PPI, designed to cover loan, credit card or mortgage repayments in the event of the borrower falling ill or losing their job. It expressed concerns that lenders are failing to deal with complaints properly and doing too little to address previous concerns over the sale of the product.
The FOS said most complaints were from people who did not realise they were buying PPI when they were sold it with a loan or credit card and that the cost of doing so was not explained to them.
The FSA introduced tougher rules on the sale of PPI earlier this year as part of an investigation into the industry, while the Competition Commission, which is set to make recommendations on the sector in December, has concluded that it is uncompetitive and should no longer be sold at the same time as the product to which it is attached.
Research published this week by consumer group Which? found that almost 1.3 million people with credit card-linked PPI wrongly believed that it was a condition of their credit card deal or that buying the product would enhance their chances of getting a credit card.
"As the credit crunch continues to take hold, people want to be protected and have peace of mind, but credit card PPI, like a house of cards, won't give you the support you need," said Doug Taylor, personal finance campaigner at Which?
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