Which? has called on the Financial Services Authority (FSA) to name and shame companies mis-selling payment protection insurance (PPI).
An undercover investigation, revealed today by the financial watchdog, found evidence of widespread mis-selling of PPI.
PPI is sold by many banks and credit card companies when you take out a new loan or card. It’s designed to cover your repayments if you become unable to work due to certain illnesses or injuries, or if you lose your job.
But the policies are often expensive, and many customers are being misled about the cover.
Around 7 million such policies are taken out each year and the sector is estimated to be worth £5.5 billion.
PPI sales failings
The investigation identified serious failings in the sales methods of several firms. As a result, 11 of them have stopped selling PPI, four are to be investigated further and 20 more may also be probed.
The three major failings of companies were: failing to give customers clear information about the product and its costs; not telling customers the extent of their PPI cover; and not explaining why the policy met their demands and needs.
That means customers can end up paying more for their loan as a result of taking out PPI, and many who make a claim are rejected because of small print get-outs.
Common ailments that might mean people lose their income, such as mental health or back problems, aren’t routinely covered.
Clive Briault, of the FSA, said: ‘We have, on a number of occasions, set out clearly our requirements for the selling of PPI. While some progress has been made by the industry, we are extremely disappointed that some firms have still made little progress in improving their sales practices.’
Which? Money’s Teresa Fritz said:‘It is shocking that, despite lenders’ assurances that they will clean up their act, PPI is still being mis-sold to such an extent.We want the FSA to name and shame offending lenders so that people are aware of which companies are breaching the rules.’