Last week’s Government announcement that consumers are to get their own ‘champion’ in the form of a consumer advocate and benefit from a raft of measures to help them better manage their debts is to be applauded says Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses, but time will tell whether the theory works well in practice.

In its White Paper ‘A better deal for consumers – delivering real help now and change for the future’ – the Government is proposing to appoint an advocate who will raise awareness of national issues and represent groups of consumers in court to help them seek compensation and refunds.

It’s banning credit card cheques - blank cheques that are sent to card holders who are encouraged to use them as an alternative spending tool. These involve handling fees and contrary to credit cards, there are no interest free periods and no protection if something goes wrong.

Other debt-management measures include; preventing card providers increasing limits without their customers’ consent, launching a new online credit card comparison tool, courtesy of the Financial Services Authority, assessing whether monthly card minimum repayments are too low (and so allow debts and accrued interest costs to spiral) and reviewing high cost credit providers (50% + APR) who offer credit over the doorstep or via payday loans.

There are also plans to assist people who are at risk from rogue traders – they will be supported by a team formed to tackle internet-based scams and a review of protection for consumers who pay for goods but are not delivered due to the company going into liquidation.

“All of these recommendations sound great,” says Sara-Ann, “but unless the advocate has real power, he or she will not deter credit card providers from encouraging customers to plunge deeper into debt and it will probably take years to implement as there will be a consultation period.”

The Government predicts its advocate will be in post early next year, but concedes the appointee will have no legal power as consultation and a new law would be needed to allow this to happen.

Sara-Ann comments: “I’m interested to see how fast the Government will tackle rogue trader issues as it’s done little to address widespread mis-selling in the PPI sector for years. As a result of its sluggish response, consumers have sunk further into debt via prolific sales of single premium PPI, where the cost of the premium is included in the final loan amount and interest added onto both, complaints to the Financial Ombudsman Service have escalated, group actions are now being undertaken and providers have a free rein to increase their prices and restrict their cover.

“I wonder how long the White Paper review period will last for? The PPI sector has been under scrutiny for around four years now and the deadline for the Competition Commission’s remedial measures isn’t until April and October next year - some five years after the Citizens Advice Bureau first identified that features of the PPI market were seriously harming the interests of consumers.”

She continues: “Given the continued failings that have been allowed to occur within the PPI sector, I’m sceptical about how effective these measures and the role of the advocate will be. I hope I’m proved wrong and sweeping changes are made to stop consumers being encouraged to spend beyond their means, but I would equally like to see greater PPI mis-selling clampdowns and more advice on how to shop around for cover.”

Sara-Ann believes PPI is an effective debt prevention tool as it will repay monthly credit card bills for up to a year in the event the holder loses an income due to accident, sickness or unemployment and would have liked to see reference made to this product in the White Paper.

She concludes: “It only takes a couple of months of missed credit card payments to build up debts which is why this cover is so useful. Credit card providers should be pressurised into offering this cover free of charge to their customers or allow them to purchase at reduced rates.

“It’s a shame the Government didn’t consider PPI in its measures to tackle indebtedness – instead it’s left to online independent providers such as Burgesses and British Insurance to ensure quality cover is affordable and accessible to all. Premiums are calculated per £100 of monthly benefit and firms such as these two charge £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.”

Anyone looking for Credit Card Payment Protection should opt for a policy that pays off all or part of the credit card debt, dependant on the amount of benefit purchased. Older-style policies tend to only pay a proportion of the total credit card bill, usually the outstanding minimum payment.

People with financial commitments are regularly reminded to take out payment protection insurance to enable them to continue paying off their debts should redundancy strike, but little attention is being given to the millions who may suffer from a stress-related illness as a result of the recession.

This is the opinion of PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses who says that consumers with mortgages, loans or credit cards are encouraged to ensure they have the means to continue paying their bills should they lose their job, but less emphasis is put upon safeguarding finances in the event of losing an income due to sickness.

Payment Protection Insurance pays claimants a monthly, tax free, pre-agreed amount for up to a year should accident, sickness or unemployment occur and Sara-Ann is fearful that people - in response to an increasing number of job losses - are opting to take out unemployment only cover on their policy.

She comments: “Feedback suggests that stress levels are escalating across the UK so it’s wise to opt for accident and sickness cover as well as unemployment - it appears you’re just as likely to have your income interrupted because of sickness as you are redundancy.”

A view confirmed by researchers from the University of Warwick who recently found that one in five workers – around five million – is believed to suffer from work-related stress. Researchers also suggested some half a million people have experienced stress at a level that made them ill.

Bernard Casey from the University’s Institute for Employment Research says the current recession will intensify stress as ‘uncertainty itself breeds stress’. And this is why Sara-Ann is urging consumers to cover all eventualities and include accident and sickness as well as unemployment on their cover.

She continues: “This recession isn’t just about business, property and jobs, it’s the emotional fall out that’s incurred as a result of a friend or colleague losing their job, the guilt at having held onto yours, the pressure to perform even better and do more with less people and the need to keep up your attendance rate in case more job cuts are announced.

“No one wants to fall ill and face the possibility of having their income interrupted, but at least PPI removes the stress of not being able to pay bills if something happens. Given stress is the perpetrator of the interrupted income in the first place, it’s an invaluable tool which could support you mentally as well as financially. It removes income uncertainty.”

Marriage counselling service Relate reported calls received last Christmas were 59% up on the previous year indicating family rows and associated stress are on an upward trend. So too are the number of working days lost because of stress, depression or anxiety.

According to the Health & Safety Executive, 13.5 million days were lost in 2007/2008 – more than the 12.9million days of output lost every year as a result of the 1970s strikes. It also reports 442,000 individuals believe they are experiencing illness from work-related stress.

Sara-Ann concludes: “More and more people appear to be leaving the labour force for longer periods of time so will need some form of financial support to maintain their bill commitments. PPI can do this, but check with your insurer before buying cover. Many of the big players like to exclude certain conditions in the small print, so it pays to shop around. When sourced from a reputable PPI provider, PPI is integral to that stress-busting toolbox. ”

Independent provider British Insurance was one of the first firms to cover stress and back-related conditions, the most common reasons for sickness absence and excluded on many policies, as well as partial cover on pre-existing conditions.

Premiums are £3.90 per £100 of benefit for accident, sickness and unemployment cover – so a person looking to receive £500 a month in place of a lost or interrupted income – would pay a monthly premium of £19.50.