Measures announced by the Competition Commission to lower prices and widen choice in the Payment Protection Insurance sector are criticised by those representing market-leading providers and applauded by consumer champions. However, what all must agree is that reforms to the selling of PPI have been a long time coming and implementation dates are still a long way off, reminds PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.

The Citizens Advice Bureau lodged a ‘super complaint’ with the Office of Fair Trading, voicing concerns about the mis-selling of PPI and exorbitant costs, in September 2005. Seventeen months later in Feb 07, the OFT referred ‘The supply of PPI’ to the Competition Commission for further investigation. Two years on, its final report is out but the Commission’s orders will not need to be followed until April and October 2010 – five years after the initial CAB complaint.

Sara-Ann comments: “I hate to think the billions of pounds of profits and policies that have been and will continue to be mis-sold during this time scale. Given the amount of financial harm the dominant providers are doing to consumers and the ever-increasing pressure being put on the Financial Ombudsman Service because of soaring complaint levels, you’d think the Commission would insist providers took remedial action sooner.”

The Commission recognises the scale of the problem warrants ‘significant intrusion’ and says its orders will enhance overall consumer welfare. In a bid to tackle the overriding issue of high prices and less choice, restrictions will be placed on organisations selling PPI and credit.

These include; a seven day ban on providers selling cover alongside their credit, the axing of single premium PPI where the cost of the policy is added onto the final loan amount and interest charged on both, a requirement to offer PPI separately to credit and the provision of more marketing material and information on policies, their terms & conditions and cost of cover (priced per £100 of benefit). This will give customers more time to shop around and compare products.

Any changes to legislation or regulation have to coincide with the Government’s set dates of April and October and the Commission envisages providers will make changes to their information provision by April 2010 and follow prohibition measures by October 2010.

Sara-Ann continues: “We’ve got to wait another 21 months before we see any real changes in the market – just under two years – and by then lenders will have profiteered even more at the expense of their customers, especially at a time when redundancies are spiralling, making people even more receptive to purchasing cover that provides an income should they lose their job.”

It’s widely-recognised that the PPI sector is a billion pound ‘cash cow’ for the main High Street lenders and leading credit card providers. The Commission reports the 12 largest distributors made profits of £1.4bn in 2006, a return on equity of 490%. In 2007, customers paid £3.8bn in premiums and the main players awarded themselves commission rates of 50-85% for mortgage cover and 40-65% for loan and credit card policies.

“This clearly evidences an extortionate mark-up and supports the theory that PPI is used to prop up losses elsewhere in their business,” suggests Sara-Ann.

Financial Services research firm Defaqto in its 2007 PPI Report identifies the average PPI premium as £4.76 per £100 of benefit for mortgage cover, £11.70 for credit card and £18.23 for loan. However, independent provider, British Insurance, charges the same premium regardless of the type of policy taken out - £3.40 for unemployment cover, £3.90 for accident, sickness and unemployment and £1.90 for accident and sickness.
In response to allegations that standalone PPI providers offer lower prices because their products are inferior, the Commission retorts ‘there is no evidence to suggest policies are of a lower quality because they are sold away from the point of sale’ and suggests ‘those with a point of sale advantage do not lead to a relevant customer benefit in the form of higher quality products’.

Sara-Ann concludes: “Why shouldn’t people be able to compare policies and prices more easily and have time to do so? Whilst detractors believe a seven day ban on the sale of PPI will create a protection gap, leaving people without valuable cover, I agree with the Commission when it says that any measures to increase competition will bring down prices and encourage more people to buy. What’s disappointing is that borrowers have a long time to wait before they’re free of their lenders’ clutches and I fear more will succumb to pressurised selling tactics in the meantime.”

News that the Competition Commission confirms it will ban the sale of single premium payment protection insurance and forbid the selling of cover at the time of credit provision and for seven days later, is to be applauded, but does not go far enough in protecting consumers’ interests, says PPI lobbyist Sara-Ann Burgess from Burgesses.

Sara-Ann believes PPI should be removed from the lenders’ product portfolio all together to ensure no further mis-selling occurs: “A seven day ban on lenders peddling their products does not go far enough and will result in them putting increased pressure on customers a week later. Given their appalling track record, I would rather see independent providers only allowed to sell this cover.”

The Commission this week published its final report into the PPI market and concludes that businesses offering PPI alongside their credit provision face little or no competition and as a result are able to charge persistently high prices. It found consumers were unaware they can buy PPI from other sources, they rarely shop around or switch providers and believed the purchasing of cover would help with their loan application or was a condition of their loan.

Inquiry Chairman Peter Davis said: “A lack of competition means consumers get worse value than they are entitled to expect…and allowing the shortcomings to continue unchecked would be damaging, not just to consumers but ultimately to the PP industry itself.”

Measures announced to tackle anti-competitive practices include; a ban on selling PPI during the sale of credit provision and for seven days later, a ban on single premium policies and a requirement for lenders to provide PPI quotes, annual statements improved information allowing customers to compare prices and policy terms & conditions.

Sara-Ann comments: “This sounds great in theory, but increasing the amount of paperwork lenders have to provide means they will be looking to recoup their costs somewhere, and I fear customers will be pressurised into buying cover and end up paying in the long run via increased premiums and inferior products.”

Only last month the Financial Services Authority, giving feedback to the Treasury Select Committee, said companies were too slow to stop mis-selling PPI and Sara-Ann believes the time is now for the Authority to ‘show its teeth’ and impose more fines on more firms.

She concludes: “Mis-selling will continue if PPI is left in the hands of credit providers – a ban on single premiums is great – no longer will lenders be able to charge interest on insurance as well as the loan, but they will use other tactics to keep their profit margins high, so customers must be careful who they purchase from.

“People will have more information to allow them to make an informed decision and there will be more freedom to shop around for cover, but I suspect once a week has passed, lenders will continue to beat a path to their door, keen to keep their point of sale advantage, so be wary. It would be better if they didn’t have the opportunity to hassle customers at all.”

News that the Association of British Insurers does not support the Competition Commission’s recommendations to ban the sale of Payment Protection Insurance at the time a loan is taken out clearly illustrates how it is acting in the interests of its members rather than consumers, says PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.

The ABI announced today its support of initiatives to provide consumers with more information and increase awareness about the product, but says a 14 day ban on credit providers offering PPI to customers is not in the interest of consumers and will widen the protection gap.

It cites statistics that show unemployment claims on PPI – a product that provides monthly cash benefits for up to a year in the event of unemployment, accident or sickness – have soared and argues that now more than ever, people need instant access to this type of cover, otherwise they will not purchase it at all.
In November 2008, there were 19,105 unemployment claims on PPI – a 118% increase from 8,722 in November 2007. Claims made in October last year totalled 18,068 - 113% up on October 07.

Given the current economic climate, it’s no surprise to find unemployment claims are spiralling, but Sara-Ann suggests this is all the more reason for consumers not to respond with a knee-jerk reaction and turn to their credit provider for cover.

“The case against lenders selling PPI at the time of credit provision is well-documented,” she comments.

“Last year, the Financial Ombudsman Service received over 25,000 complaints from people who were mis-sold policies and the majority of these can be attributed to High Street lenders - the ABI’s members.”
Although the ABI says its members have made changes to how they sell PPI and more improvements are to come, Sara-Ann counters this is too little too late and they cannot be trusted: “Lenders are not going to change the habit of a lifetime – they’ve had plenty of time to demonstrate that they are indeed, treating customers fairly, but still we’re witnessing a steady stream of fines from the Financial Services Authority. If lenders had behaved more ethically in the first place, there would never have been a Competition Commission investigation.”

The Commission’s statutory deadline, when it will enforce its recommendations, is 6 February, however the ABI says it has not taken into account the worsening economic climate since it undertook its investigation and is concerned consumers who would have benefited from PPI will be left unprotected if they are unable to purchase from their lender within 14 days.

Sara-Ann continues: “I don’t agree – consumers are unlikely to take out a loan and within 14 days default on their first payment, so that ‘protection gap’ is potentially very small. The ABI fails to recognise that consumers are becoming more financially savvy - increasing job losses are forcing them to be – so they will want to protect themselves. More claims are because more people are buying cover.

“Lenders will be able to discuss with customers whether they need to protect their loan payments and have some form of replacement income if they’re made redundant, but will only be able to provide their product information. This gives consumers invaluable thinking time and is perfectly reasonable.”

Whilst the debate over who should sell PPI rumbles on, independent providers do appear to offer a better deal. Premiums have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income and standalones such as British Insurance has never received a product or service complaint.

Sara-Ann concludes: “Increased demand for policies will result in more mis-selling if credit providers are allowed to offer PPI at the time a loan is taken out. Lenders will prey on the vulnerability of their customers and pressurise them into taking out cover – regardless of whether they need it or not.

“The ABI has contradicted itself – it wants to empower consumers and give them more information, but then doesn’t want them to shop around and make an informed decision. How can it not be in the interests of consumers to put in place measures that prevent pressurised selling? People are quite capable of deciding when and how they want to purchase cover and will want to shop around to secure the best deal.
“The only hardship will be for the lender who is unable to make a profit out of PPI at the expense of its customers due to its point of sale advantage. Consumers need that breathing space to consider other providers and I applaud the Commission’s proposals that will allow them to do so.”

Consumers lured into taking out credit cards from providers offering payment holidays may not be getting as good a deal as they think says PPI lobbyist Sara-Ann Burgess.

Firms are beginning to market cards with optional payment breaks, allowing consumers to freeze their accounts and clear outstanding arrears. However, those opting to use this facility are charged a monthly up-front fee that increases in line with the amount owed.

Sky’s credit card, launched in conjunction with Barclays, encourages consumers to collect Sky points, giving one point for every pound spent. Points are used to get money off monthly bills or to purchase movies. Customers keen to activate its payment break option are charged a monthly fee of 0.89% of the account balance.

“This is no different to other providers who offer a range of cash-back or point collection systems to tie-in people into their cards,” comments Sara-Ann. “But what is different is the pre-emptive charging for the so-called perk of taking a payment holiday. Even though consumers pay a ‘premium’ for the privilege of being able to suspend their accounts should their debts spiral out of control, Sky insists this is not insurance, so will slip under the regulatory net.”

Anyone employed, self-employed, retired or permanently disabled can take the payment break option and its activation criterion is wide-reaching. It includes accident, sickness and unemployment and Sara-Ann worries consumers will confuse it with Payment Protection Insurance.

“People are looking at ways they can meet their monthly bill commitments should they lose they job and I worry this card gives the impression it will help pay people’s debts. It might be giving them longer to pay off their debt, but gives no tangible support to enable them to do so. PPI on the other hand, provides a monthly cash benefit should redundancy occur, that can be used to pay a variety of bills, including credit cards and other loans.”

She continues: “Given the Government recently recommended credit card providers freeze accounts for customers struggling to pay their debts and allow them to make payments at existing interest rates, rather than increase them, I fail to see how Sky can justify charging people for something their counterparts will do anyway.”

In its terms and conditions Sky says customers have up to 30 months to clear their debts and they will not incur any interest charges. At the end of the activation period, the account will resume incurring interest, plan charges and other fees.

However Sara-Ann warns consumers to be wary: “There’s a mind-boggling array of jargon in their small print with references to default charges, interest on default charges, promotional balances, standard balances and cash balances. All I’m saying is read the small print and be aware that you will pay up-front for something and interest will be charged.”

A view shared by the Consumer Credit Counselling Service who says: “Before taking out any type of loan or credit card, you need to know what you’re getting into – so read the small print and cost implications. This type of card has the added security of a payment break option, but charges will escalate if the debt spirals out of control. Credit cards are never good for people who are at risk of over-extending themselves.”

Sara-Ann concludes: “Although Sky will counter that consumers do not pay interest whilst their accounts are frozen, I suggest customers have already paid this up front via a monthly payment break fee that increases in line with their debt. By adding extra charges onto a monthly credit card bill, it will only serve to push people further into debt, increasing the amount owed. What’s equally galling is that Sky encourages people to spend more to gain points and suggests they use these points on its gambling site – it’s wholly irresponsible.”

People dithering over whether to buy redundancy protection must act sooner rather than later or they may end up with cover that won’t pay out should they lose their job, warns Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

She explains: “Although PPI, or redundancy cover as it’s often referred to, is freely available to anyone who wants to buy it, claims will be rejected from people whose employer announces redundancies before the policy is taken out or up to four months after purchase. Even if specific job cuts aren’t identified, insurers will rule that the employee was ‘at risk’ of redundancy and therefore ineligible to claim.”

Sara-Ann’s call for workers to act quickly and take out cover before further redundancy notices are given, comes in the week that recruitment firm Randstad released survey findings showing 46% of 350 public and private organisations are planning to cut staff levels in the next few months.

Its survey reveals an increasing number of employers intend to cut at least one in 10 of their workforce, indicating job losses will be higher and more widespread than anticipated.

The Federation of Small Businesses also says its members will make further redundancies having witnessed a 214% rise in calls from firms seeking employment advice in Q4 2008. During this period it received 4905 calls, up from 1562 logged in the same quarter in 2007.

In the first quarter this year, the Federation expects 85 businesses to go into administration every day and predicts this will increase to 120 daily in Q2. Sara-Ann continues: “This equates to 18,570 businesses going bust in the first six months of 2009 and given the average small business employs four people, 74,280 people are at risk of redundancy.

“This is an horrendous figure and underlines the importance of everyone having PPI or some other form of financial support to meet monthly commitments should a salary be lost. Smaller job cuts don’t make the headlines these days, just the ones where hundreds and thousands of redundancies are announced in one go, such as Woolworths, Corus, Barclays, M&S, Jaguar Land Rover, Adams and South Eastern trains.

“However, whatever the profession, business-size and sector, people must consider ways to protect themselves against spiralling debts and ensure they can recoup a percentage of their salary to pay bills should they lose their job.”

Payment Protection Insurance pays a pre-agreed sum every month for up to a year to meet varying financial commitments such as loans, credit cards and wider household bills, if redundancy occurs. But, it will only pay out if the policy is taken out well before any job losses are notified.

Claims are excluded from policyholders who are aware of any impending unemployment due to job loss announcements or mergers/restructures before the start date of the policy or within 4 months of it being taken out. This approach may be considered unfair, but insurers state this is ‘standard industry practice’ and avoids a knee-jerk reaction from workers looking for instant policy payouts.

Sara-Ann concludes;”PPI rewards prudent consumers who are proactive in recession-proofing their finances, rather than making payments to people who decide to take out a policy once they hear their job might be on the line. This is why I’m urging employees to act now, redundancy is a threat to all and the earlier PPI cover is taken out, the more likely the claim will be paid.

“However, be wary, there are unscrupulous providers who do not go through the exclusions and will not bother to check a customer’s claims eligibility. Buy cover from independent PPI providers who will not mis-sell cover and are likely to offer more competitive premiums and broader support services.”

PPI premiums are calculated per £100 of benefit and standalone firm, British Insurance, charges £3.40 per £100 for unemployment cover. A person looking for a monthly replacement income of £500 would pay £17 a month.

British Insurance has a 100% customer retention rate, has never received a product or service complaint, has policies for homeowners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

Last week’s unemployment and mortgage arrears figures, coupled with the recognition that the UK is officially in recession, should prompt people who cannot pay bills if they lose their job, to consider Payment Protection Insurance says PPI lobbyist Sara-Ann Burgess from Burgesses.

According to the Office of National Statistics, unemployment topped 1.92 million between September and November last year and mortgage lending data released by the Financial Services Authority shows there were 340,000 homeowners in mortgage arrears at the end of Q3.

Two consecutive periods of falling economic growth – and the biggest quarter on quarter decline since 1980 - has resulted in the worst recession for a generation.

Sara-Ann comments: “Although these figures are likely to have little impact on those still in a job and able to pay their mortgages and other bills, it does indicate that the recession is deepening, no one is immune from its impact and people must ensure they have a financial safety net in place to protect them from spiraling debts.”

Whilst the jobless total is at its highest since September 1997, it doesn’t take into account the thousands of redundancies announced from November onwards. The British Chamber of Commerce predicts this figure will rise to 3.1million over the next two years.

Equally, it’s been suggested the number of people in mortgage arrears is the ‘tip of the iceberg’. Already the figure is 24% higher than 2007 and analysts suggest there will be 200,000 repossessions over the next five years. Shelter says 900,000 homeowners are struggling or falling behind each month with their mortgage payments.

Sara-Ann’s concern is that there are measures people can take to help cushion the financial fall-out from redundancy, but few are choosing to protect themselves: “We know very few people are managing to save in this current climate - moneyexpert.com says a third of adults would face financial disaster within two months if they lost their jobs, and half of these would only last a month – so why aren’t more buying Payment Protection Insurance?”

PPI pays out a pre-agreed sum every month for up to a year to meet a wide range of financial commitments, should the policyholder lose their income due to unemployment, an accident or sickness. Premiums are calculated per £100 of benefit and policies can either meet mortgages, loans and credit cards or provide a replacement income to cover wider bills such as utilities, food and transport.

An increasing number of financial services providers have been fined by the Financial Services Authority for mis-selling PPI and Sara-Ann suspects the failure to purchase cover is because people do not trust High Street lenders and are unwilling to pay their premiums. Research undertaken by the Competition Commission and consumer champion Which? reveal providers who offer credit alongside PPI, often pressurise customers into buying cover they often do not need and will not be able to claim on.

She continues: “There are independent, more-ethical providers, who offer affordable, low-cost cover that will make a substantial difference to your household finances should you lose your job. Their premiums have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income.”

Standalone firm, British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment, and £1.90 for accident and sickness. A person protecting against redundancy and looking to receive £500 a month to meet mortgage repayments would pay £17 a month.

Sara-Ann concludes: “People want to know they’re in ‘safe hands’ when it comes to taking out a policy and that their claim will be paid if they lose their job. Firms such as British Insurance should have their confidence. It’s won more awards than any other PPI provider for its policies and the way in which it treats customers fairly, has a 100% customer retention rate, has never received a product or service complaint, has policies for homeowners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

“Given the gloomy predictions, everyone should be assessing their finances and ensuring they have the means to continue paying bills should they become one of the million or so unemployment statistics.”

Consumers worried about having been mis-sold Payment Protection Insurance can now download complaint forms via the social networking site, Facebook. PPI lobbyist Sara-Ann Burgess from specialist firm, Burgesses, calls the move ‘inspired’ and warns unscrupulous providers ‘the net is closing in and your deceptive practices will be exposed’.

In a bid to encourage more people to take PPI providers to task over cover that was wrongly sold, consumer watchdog Which? has added a Payback application to the site. It allows users to send the application to friends, download a template claim letter and join a PPI fair-selling campaign.

The move comes at a time when PPI providers are under increasing scrutiny by the Competition Commission and Financial Services Authority for mis-selling cover and is designed to raise awareness amongst graduates and young professionals who are just as likely to be ripped off as anyone else.

Sara-Ann comments: “There’s been widespread mis-selling of PPI and this latest initiative will raise awareness of the issues, encourage people to consider whether they have a case to reclaim their payments and make it easier to do so. No one wants to spend time complaining, but this application removes a lot of the hassle. It’s reaching groups of people who wouldn’t necessarily know what next steps to take and is a great example of ‘thinking outside the box’.”

Already last year, the Financial Ombudsman Service received more than 25,000 complaints for PPI mis-selling and Which? believes this is the ‘tip of the iceberg’. Its survey last year found that 32% - nearly two million - of the six million people with loan PPI could have been mis-sold cover. If this percentage was applied to credit card PPI, where there are over 7.5 million policyholders, it predicts a further 2.4 million might have cause to contact their provider or the FOS.

Sara-Ann continues: “Anyone who has a loan or credit card PPI policy needs to check the small print to ensure they’re eligible to claim should they need to do so. I suspect Payback will have a huge impact on the number of complaints going to the FOS as providers will undoubtedly try to ‘fob off’ consumers and wriggle out of their responsibilities. However, people with policies shouldn’t be put off. It’s galling to think unnecessary insurance has been paid for and even more frustrating if people don’t know what to do about it. Initiatives such as these allow consumers to take direct action and are most welcome.”

Credit card providers were recently lambasted for not treating customers more fairly, especially those who fall into arrears with payments. In December companies succumbed to Government pressure and agreed to give more ‘high risk’ customers 30 days notice before raising interest rates or freeze the account and allow the debt to be paid off at existing rates.

But Sara-Ann feels this doesn’t go far enough; “Greater transparency and a more ethical approach on the selling of insurance and charging of interest is needed. Reductions on premiums and interest are vital, especially with more people facing job losses and figures from independent research firm Defaqto showing APRS rose from 16.6% to 17.7% in the last year - way ahead of current rates.

“We all know that if card providers are unable to make huge profits out of people who only make a minimum payment each month, they will look to recoup it in other ways. Usually this means more pressurised selling of over-priced PPI and in this current climate, I fear more will pay over the odds for cover that often has limited benefits and they may not need.”

PPI is designed to pay credit card debts for up to a year should the policyholder lose their job, have an accident or become sick. However, older-style policies tend to only pay a proportion of the total credit card bill, usually the outstanding minimum payment.

Standalone provider, Safety First, has a credit card protection policy that pays off all or part of the credit card debt, dependant upon the amount of benefit purchased. Premiums are calculated per £100 of monthly benefit - allowing consumers to choose what proportion of the credit card bill they would like the insurance to pay off.

Prices are £1.90 per £100 for accident and sickness cover, £3.40 per £100 for unemployment and £3.90 per £100 for all three – well below other providers’ premiums. There’s also a back to work support service helping claimants with job seeking, CV preparation and interview techniques, plus access to a job vacancy database that’s updated daily.

Sara Ann concludes: “Consumers should have a mechanism in place to pay their bills should their income become interrupted and be aware they do not have to purchase cover from their credit provider – those who shop around will get a better deal and are less likely to be mis-sold cover.

“Providers who aren’t tied to credit provision do not have a hidden agenda when it comes to their policies – there are no losses to recoup because customers have failed to pay their loans/credit, so there’s no pressure to make a PPI sale or charge exorbitant premiums. As the PPI fair-selling campaign gains momentum and investigations by the CC and FSA continue, those who mis-sell policies will be exposed and named and shamed, just as Egg recently was.”

Payment Protection Insurance lobbyist, Sara-Ann Burgess, from specialist firm Burgesses is calling for redundancy protection to become compulsory once a mortgage is agreed.

Her appeal is a result of increasing frustration that no proactive measures are being implemented to ensure people have a financial support mechanism in place before they lose their job.

Sara-Ann says: “There’s plenty of Government rhetoric about how it will support families after they’ve lost their salary via Income Support for Mortgage Interest payments, but very few households are eligible.

“Recommendations to lenders to allow cash-strapped homeowners to defer their mortgage payments or pay interest rather than capital aren’t helpful either - all this does is ease the short-term burden of repossession by increasing long term debt. None of these measures tackle the root cause of mortgage arrears, which is an inability to make monthly repayments because of redundancy.

“Whilst they might provide some temporary relief from financial meltdown, these measures do not tackle spiralling debt levels and will not wipe anyone’s financial slate clean. It really is a case of ‘closing the stable door after the horse has bolted’. ”

Payment Protection Insurance, will however, wipe the ‘financial slate’ clean for up to year, paying a monthly income in the event of accident, sickness or unemployment. Unemployment-only cover premiums with an independent PPI provider, such as British Insurance, are £3.40 per £100 of benefit payout, so a person looking to receive £500 a month to meet mortgage repayments would pay £17 a month.

Sara-Ann believes that if every homeowner took out a Payment Protection Insurance policy alongside their loan, there would be fewer repossessions, lenders would be less likely to incur losses and the Government would not have to use billions of pounds of taxpayers’ money to make up the deficit.

She continues: “It’s a win, win scenario for all. Banks and building societies insist on customers having buildings insurance so they can recoup losses if any damage occurs to the property they’re lending money on, but they’re not so keen to protect their fiscal outlay and recoup losses if the homeowner is unable to pay the mortgage.

“PPI gives a financial lifeline to thousands of people whose lives will be torn apart if they lose their homes and is the one proactive measure that will help slow down the increasing numbers of repossessions, reduce the amount of unsold housing stock in our communities and top up lenders coffers.”

Despite its benefits, very few homeowners have PPI. According to the Association of British Insurers and Council of Mortgage Lenders, only 22% of new homeowners bought PPI in the first half of 2008 and those continuing their payments dropped to 17%.

Sara-Ann explains: “I suspect this is due to the fact that many people believe redundancy will never happen to them, coupled with the poor reputation of the PPI sector. Its investigation by the Competition Commission has been well-publicised and consumers are wary of lenders who have a point of sale advantage and mis-sell/over-price PPI.

“Also a number of high-profile credit providers have received Financial Services Authority fines for pressurising customers into buying cover they do not want or need and there’s been a rapid increase in the number of complaints to the Financial Ombudsman Service – over 25,000 last year.

“However, not all providers should be tarnished with the same brush. Independent firms, who do not link the sale of PPI to the provision of credit, have been found to offer mortgage cover that’s four times cheaper than their High street counterparts and often with better benefits and support services.”

Given the Chartered Institute of Personnel and Development predicts 600,000 jobs will go in 2009 and the CML says there’ll be 75,000 repossessions this year, Sara-Ann is urging the Government to re-think its strategies and take a more proactive approach to help people avoid falling into debt, rather than waiting until it’s too late.

She concludes: “The threat of redundancy is real and widespread and no sector is immune. The Government and PPI providers have a responsibility to ensure homeowners have easy access to affordable protection products that will help them in the face of adversity. And let’s not stop at mortgages, those renting or in social housing are equally at risk of redundancy and losing their family home, so should have access to the same financial protection.”

News that a number of High Street banks are to stop selling single premium Payment Protection Insurance at the end of this month is to be applauded, but consumers should be wary of purchasing products from these providers as the monthly alternatives may not be suitable for their circumstances and will be over-priced, says PPI lobbyist Sara-Ann Burgess from specialist firm, Burgesses.

In November last year the Competition Commission announced a series of remedial measures designed to put a halt to the anti-competitive practices of lenders and increase competition in the PPI sector. It recognised lenders were exploiting consumers through their point of sale advantage and recommendations included; a 14 day ban on the selling of PPI alongside the credit provision, a separation of the PPI quote from the loan offer, a ban on the sale of single premium policies and greater clarity in the information provided to customers, allowing them to better compare products and prices and so shop around for cover.

The Financial Services Authority this week welcomed moves by the Alliance & Leicester, Barclays, the Co-Operative bank, Lloyds Banking Group (including Lloyds TSB, Halifax and Bank of Scotland) and Royal Bank of Scotland/NatWest to stop selling single premium PPI with unsecured personal loans by the end of January, however Sara-Ann counters that lenders should never have offered these policies in the first place.

She comments: “Lenders may be self-congratulating themselves now for acting responsibly and removing their ‘cash cow’, but it doesn’t alter the fact that they’ve ripped of thousands of consumers who have been locked-into policies for years and paid extortionate premiums as a result.”

Around 90% of the £5billion plus PPI sector is in the hands of High Street lenders who are keen to bundle cover in with their credit offering. With single premium PPI the customer pays up front for the cover at the time of taking out the loan, rather than making monthly payments at a later date. The cost of the policy is added onto the loan amount and interest is charged on both.

Sara-Ann continues: “It’s like a long-term double whammy - consumers pay two lots of interest but are presented with a single monthly loan repayment figure. It’s nothing more than extortion and has vastly contributed to lenders’ profit margins.”

Lloyds TSB in December reported that the transition to a monthly premium policy is expected to reduce its income by £300million over the next 12 months, largely as a result of a change in the timing of income recognition.

“However they package this up, suggests Sara-Ann, “the banks know they will make losses. But consumers be warned - lenders will be looking to sell more monthly PPI at greater costs to bridge any shortfall created by the demise of single cover. So although consumers may think there’s less likelihood of being ripped off and sold something inappropriate, this may not be the case – especially given lenders’ past track records.”

According to the Financial Ombudsman Service, a high proportion of the 25,000 PPI complaints received last year can be traced back to High Street lenders and a number of banks have already been fined by the FSA for PPI mis-selling.

In October last year, the Alliance and Leicester was fined £7m for ‘serious failings in its telephone sales of PPI’. Over a three year period, A&L sold around 210,000 policies, costing an average of £1,265, to customers wanting a personal loan – netting over £265million.

The FSA found; advisers failed to detail the cost of PPI, looked for reasons to sell it without properly considering customers’ needs, didn’t make it clear the cover was optional and trained staff to put pressure on customers who queried why PPI was included in their quote or challenged the recommendations they were being given. It concluded ‘these failings resulted in unacceptable levels of non-compliant sales and a high risk of unsuitable sales’.

Two months later, online bank Egg was on the receiving end of a £721,000 fine for mis-selling credit card PPI in around 40% of its telephone sales. Egg sold 106,000 credit card policies at an average cost of £156, boosting its coffers by over £16m.

Fines have also been given to; Liverpool Victoria Banking Services (£840,000), HFC Bank (£1.085m), Loans.co.uk (£455,000), GE Capital Bank (£610,000) and Capital One Bank (Europe) PLC £75,000.

Sara-Ann concludes: “What does this tell you about these lenders’ morals? It’s clear they weren’t treating customers fairly and what’s to say they will now? This economic downturn is putting even more pressure on lenders to recoup their losses and I suspect they will endeavour to do this by selling more PPI at over-inflated premiums.

“In this current climate, it’s more important than ever to take out some form of payment protection so the monthly bills are paid for up to a year, in the event of redundancy, sickness or accident. I therefore urge consumers to source PPI cover from ethical independent providers who aren’t making huge losses because of debt problems, so will not be looking to profiteer out of their customers.”

Independent providers’ policies have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income and often offer better benefits and support services

Low-cost alternatives such as British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It has won numerous awards for its policies and the way in which it treats customers fairly and provides cover for home owners, those renting and people in shared ownership schemes.

Government measures announced this week to kick-start the housing market and get High Street banks and building societies lending again are not in consumers’ best interests, says Payment Protection Insurance lobbyist Sara-Ann Burgess from Burgesses.

She comments: “The Government appears to have tunnelled vision – it is in such a rush to help mortgage providers return to their ‘normal lending patterns’ that it’s lost sight of the fact that many people are not in a position to increase their debt levels and take on a mortgage, particularly at a time when there is such a high risk of redundancy.”

Gordon Brown’s latest package of measures include a scheme to offer lenders insurance against debt losses and an extension of the nationalised banks’ repayment period so they are able to free up some of their capital and expand their mortgage lending.

Sara-Ann continues: “Whilst the devil will be in the detail and it’s early days, the overwhelming message I’m getting is that mortgage providers are being given the green light to lend money and not worry about the consequences. If a business or individual does have problems meeting the debt and the lender incurs losses, an insurance scheme will pay a proportion of that debt. But what about the firm or person that’s struggling – are they just another insolvency or repossession statistic – where does their support mechanism come from?

“Have people forgotten why we’re in this mess in the first place? On the one hand banks are condemned for irresponsible lending and on the other, they’re encouraged to increase the number of businesses and individuals they offer credit to. Past mistakes will be repeated and I seriously question whether the Government is acting responsibly.”

Sara-Ann’s concerns are fuelled by feedback from 67 leading economists who at the beginning of the year warned Britain would suffer its worst economic crisis for decades and feared the Government’s recovery plans will not work. She concedes they were speaking before this latest set of measures were announced, but refers to six out of 10 who indicated property prices would tumble into 2010 and the London School of Economics who says there will be no significant recovery in 2009 .

“It’s complete folly to encourage people to buy now and saddle themselves with further debt when house prices are set to plummet further” suggests Sara-Ann. “We’re experiencing rising utility bills, contracting wages and increasing job losses – and yet the Government overlooks these as key contributors to debt when unveiling its support measures.”

In his speech, Gordon Brown referred to the increasing number of individual borrowers facing difficulties and suggested the principal reason for this is the reduced availability of credit.

Sara-Ann counters: “For businesses this may be the case, but I suggest individuals’ financial difficulties are more to do with rising costs and less spare cash than a reduction in mortgage finance. Granted, more money going into businesses will hopefully halt some redundancies, but individually, people should not be lulled into overstretching their finances and committing to higher monthly bills just to tick a Government box.

“11.7million people have mortgages and according to a report from the Shadow Housing Minister, Grant Shapps, 44% of them - over 5million - are worried about being able to meet their mortgage payments this year. What’s the Government doing to support them, or the 900,000 homeowners identified by Shelter as already struggling or falling behind with their mortgage repayments each month? Let’s tackle the debt issues we already have and not create new ones.”

The Government recently called for lenders to allow customers to defer their mortgage payments or pay interest rather than capital, plus it has extended its Income Support for Mortgage Interest scheme (ISMI) to ensure more families qualify. However, Sara-Ann believes other measures should be introduced as these schemes either provide short-term relief to increase long-term debt or are only applicable to fewer than 2% of households on means tested benefits.

“£37billion of taxpayers money has been spent on propping up financial institutions because the Government failed to regulate them properly in the first place, and now billions more will go into schemes to make it easier to saddle people with further debt. I would like to see some of this money channelled into helping people with existing debts and supporting them should redundancy occur.”

Sara-Ann concludes: “People should not borrow without having a financial safety net in place to meet their monthly repayments should a salary be lost. If the Government pledged to pay a proportion of borrowers’ PPI policies, it would replace the need to provide insurance for lenders against an individual’s debt.

“The Government tops up personal pension pots and should do the same for PPI. Then more people would be keen to buy a policy and consumers, lenders and the Government would be left with fewer debts.”

PPI pays pre-defined bills, such as mortgages, loans and credit cards, or provides a monthly income to cover a range of financial commitments, for up to a year, in the event of an accident, sickness or unemployment. Sara-Ann describes it as the one proactive measure that can prevent families sinking further into debt and provides a lifeline in the face of adversity.

Although available from High Street lenders, independent PPI providers such as British Insurance offer cover that’s four times cheaper for mortgage protection, five times for income and 10 times for loan.