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.

News that lenders are beginning to loosen their purse strings and offer an increasing number of mortgages is good news for the economy, but people must not be tempted to commit to large monthly repayments unless they have the means to continue those payments in the event of redundancy, warns Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

Her advice follows feedback from the British Bankers’ Association that approvals for house purchases rose to 31,162 in May – up 15.8% on the previous month and continuing a six month upward trend.

As funds become more freely accessible, the repayment costs for fixed rate mortgages – a favourite with first time buyers – appears to be increasing in line with demand. BBA Statistics Director David Dooks says High Street banks and building societies are relaxing their lending constraints and offering mortgages to people who do not have large deposits. To counter this, they’re raising the cost of their fixed rate deals.

In the space of a week homeowners can expect to pay £180 a year extra for a two year fixed rate and £219 for a three year deal. It is the prospect of having to find more cash to get a foot on the housing ladder that concerns Sara-Ann.

She comments: “It’s great that more people are getting their mortgages approved, but with higher fixed rate costs and lower interest rate returns on savings, there will be less spare cash to spend on vital products such as PPI. Anyone taking out a loan must consider the ‘what if’ factor and have in place a mechanism that will maintain their monthly repayments should their salary become interrupted due to accident, sickness or unemployment.

“With such high levels of job insecurity, PPI is growing in popularity. However, the majority of borrowers opt to take out the PPI that’s offered by their lender which means they’ll be paying over the odds for cover that can be sourced cheaper elsewhere.”

According to the Council of Mortgage Lenders, 73% of all PPI is sold via lenders, despite independent research confirming that policies offered by standalone firms are four times cheaper for mortgage, five times for income and 10 times for loan protection.

The Organisation for Economic Co-operation and Development predicts 0% growth for the UK in 2010 and with more job losses on the horizon, Sara-Ann is warning borrowers not to become complacent and commit all their cash to a mortgage without having some form of financial safety net in place.

She continues: “In a rush to secure a fixed rate deal, people may overlook PPI, calling it an unnecessary expense. Those who do buy cover tend to purchase from their credit provider, in the mistaken belief that it is a condition of the loan. But this isn’t true - earlier this year the Competition Commission said it will ban lenders from pushing their PPI cover at the time a loan is taken out and it was no surprise to find lenders crying foul – worried at the prospect of losing a huge income stream.”

PPI pays a pre-agreed monthly tax free sum to the claimant for up to a year if their salary is interrupted and independents such as British Insurance offer back to day one cover and a range of support services and benefits.

Sara-Ann concludes: “Unemployment claims on these policies are growing month by month, indicating it has a vital role to play in helping people repay their debts during times of hardship. An increase in mortgage offers will result in lenders trying harder to push their products so I urge borrowers to be prudent, consider whether they need this cover to prop-up their finances and shop around for a better deal.”

News this week that two thirds of workers have not saved enough to manage their debts if they lost their jobs is a scary situation to be in, but it can easily be remedied by taking out a Payment Protection Insurance policy says PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.

Research recently undertaken by insolvency specialists MCR reveals 70% of workers only have enough money to last between a week and two months in the event of redundancy and 23% would have no idea how to manage their debts if their income went.

“These are staggering statistics,” opines Sara-Ann, “and clearly underlines the important role PPI policies have to play in these recession-hit times. PPI is the only mechanism that provides a cash boost to people who have been unable to stash away funds to meet future debts.”

The policy kicks-in if the claimant loses an income due to accident, sickness or unemployment and monthly premiums are priced dependent on the amount of benefit the policyholder is looking to receive. Tax free payments can be made for up to a year and cover is available specifically to meet mortgage, loan or credit card monthly repayment costs or to pay a wider range of bills such as rent, utility, council tax and food.

Despite its benefits, very few people opt to take out and claim on this cover. According to the Association of British Insurers there were 33,895 people claiming on the unemployment section of their policy in February this year. Given unemployment reached 2.2million earlier this month, Sara-Ann suggests more people should pay into a product that will prop them up financially when hard times strike.

She continues: “Around 1.5% of the unemployed are relying on PPI for an ‘income’, ahead of their savings, if they have any. This is pitifully low and I urge anyone worried about their financial situation and job security to consider this cover as an option.”

Surprisingly, MCR found that only 14% of respondents in its You Gov survey were concerned about losing their job, despite predictions from the Centre for Economics and Business Research that 334,000 jobs from the business services sector alone will go in the next five years. MCR did, however, find that more workers are taking steps to get prepared for a job loss - 64% professed to be changing their spending habits in a bid to better manage their debts. But the consultancy, along with Sara-Ann believe these actions are ‘too little, too late’.

She comments: “Any attempt to save funds for the future must be applauded, but in order to meet bill commitments for three months or so, most people would need thousands of pounds to cover the mortgage or rent, utility, tax, food etc. This means saving over a prolonged period of time, which for many is unachievable.”
Sara-Ann has for years called for lenders to lower their costs and make these policies more easily accessible to all, but instead they have increased their premiums and restricted unemployment cover to certain sectors. But Sara-Ann remains optimistic that independent PPI providers will continue to offer policies at competitive prices and provide cover for those looking for unemployment cover only.

She concludes: “Firms such as British Insurance charge £3.40 per £100 of benefit for unemployment cover, so a person paying £17 a month in premiums would receive £500 a month for up to a year. There are mechanisms out there to help people manage their finances when redundancy occurs and they do this without eating into any savings. After all, why should people lose their savings when there’s a low cost alternative that will keep those funds intact and still pay the bills? A monthly PPI policy costs less than a monthly digital tv subscription package or a take-away for a family of four.”

As retailers continue to vie for consumers attention by offering an ever-increasing number of ‘buy now, pay later’ deals, Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses is warning people not to be taken in by agreements that could end up costing them more than they bargained for.

The Finance and Leasing Association earlier this year said the number of consumers opting for store instalment credit deals – whereby they put down a small deposit or nothing at all, take their goods home and then pay off the lump sum with interest over a number of months - is steadily increasing, despite the uptake of credit in other areas slowing down.

In February and March this year, shoppers opting for store instalment credit deals grew by 8% and 24% respectively and a month later, the Confederation of British Industry reported April retail sales had risen by 44% - the highest rate since January 2008.

Although confidence to splash the cash via low-cost store deals appears high, shoppers are reluctant to take on higher-value financial commitments. According to the FLA, loans secured on borrowers’ homes fell by 76% in March 09, when compared to the same period last year. No surprise given unemployment now tops 2.2 million.

Sara-Ann is concerned that although a bit of retail therapy is a great moral booster in the short term; in the long term it is another financial burden that will drain resources further. She comments: “We all like to think we’re getting a bargain, but the final cost of the hire purchase deal will undoubtedly end up costing more than if the item had been bought outright.

“What happens if the monthly repayments cannot be met because of a drop or loss of income? The borrower will have spent months paying for something that’s now gone back to the store because of a default on payments, so there’s nothing to show for the early outlay.”

Debt agencies all advise against building up debt levels via store cards and hire purchase deals and agree that low-level debts collectively can prove crippling. Sara-Ann continues: “There’s only a certain amount of money available each month to pay debts and whilst offers to ‘take home now and pay later’ are very tempting, these goods will take-up a proportion of the monthly salary and add to the list of financial commitments such as the mortgage or rent, utility, tax and food bills.

“Anyone with a number of financial commitments should ensure they have the means to continue making their monthly repayments should redundancy occur. Unfortunately, for many people, their savings pots are shrinking leaving them to have to consider other options such as Income Payment Protection.”

IPP is a policy that pays a pre-determined monthly amount to the clamant in the event a salary goes due to accident, sickness or unemployment. Premiums are priced per £100 of benefit and policyholders can choose how much they would like to receive every month if their income is interrupted. The higher the benefit payout, the higher the premium.

Sara-Ann concludes: “In-store credit appears to be the favoured option at the moment, but let’s not lose sight of the fact that if it’s free now, it will cost more later and you will have to have the means to make that repayment, or risk losing it. In comparison, income protection offers the benefits later on. It costs as little as £3.40 per £100 of benefit for unemployment cover with independent providers such as British Insurance, so a person looking to receive £600 for up to a year to cover their commitments would pay a monthly premium of £20.40. This equates to a yearly premium of £244.80 which could in the future return an ‘income’ of £7,200.”

With loss of income now the main reason why people sign up to debt management plans, Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses is urging borrowers to consider PPI when taking out a mortgage, loan or credit card.

According to debt management provider, Euro Debt, ‘loss of income’ is the top response when it comes to explaining why a plan is needed and for the first time, pushes ‘spiralling multiple debts’ into second place.
Some 4000 respondents were questioned over a six month period (December 08 to May 09) and over one in four - 28.5% - cited redundancy as the key driver behind their indebtedness. A figure which Sara-Ann says could be much lower if PPI was purchased.

She questions: “For a low outlay, people can buy a policy that will meet their monthly financial commitments should they lose their job and avoid the need to set up debt management plans, so why do so few opt to purchase this type of cover? There’s a huge amount of job uncertainty out there and yet people ignore something that provides financial certainty for up to a year.”

Issues surrounding PPI mis-selling and recent news of premium hikes and cover restrictions appear to be putting people off purchasing policies, but Sara-Ann is quick to point out that not all providers are adopting the same tactics and where properly sold, low-cost PPI can be a financial lifeline.

She counters: “Over half the mis-selling complaints to the Financial Ombudsman Service are as a result of the actions of the UK’s six largest financial services groups. However, where PPI is purchased separately to the mortgage, loan or credit card provision, you will find a completely different story. I know of standalone firms such as British Insurance who have never received a complaint about their claims, price or service delivery, reiterating my point that good quality cover at affordable premiums is available to all.”

The TUC this week warned that unemployment will carry on rising for some time after the UK economy picks up and predicts jobless figures will increase until the autumn next year. There are also predictions that the Office of National Statistics will today announce unemployment figures of over three million.

“With such compelling statistics,” continues Sara-Ann, “I urge anyone taking out a loan or with credit card commitments to put in a place a mechanism to ensure their monthly payments can still be made in the event of redundancy. This is not scare-mongering - it’s encouraging people to act prudently and fend off financial adversity.”

Whilst the Bank of England confirms mortgage approvals rose in May to 43,200 – an increase of 57% on November’s figure of 27,500, money charity Credit Action says that during the three months to the end of March this year, 3,178 people reported they had become redundant every day.

Sara-Ann concludes: “On the one hand mortgage lenders are congratulating themselves for increasing the amount of credit they’re extending, and on the other, we’re seeing more and more people losing the financial capacity to repay their debts. PPI can stem that tide of indebtedness and I sincerely hope borrowers siphon off a small amount of their monthly income to pay into a policy – then they will lose that loss of income worry.”
British Insurance charges £3.40 per £100 of benefit for unemployment cover, meaning that a person spending £17 a month would, in the event of redundancy, receive £500 a month for up to a year.

Payment Protection Insurers have had their knuckles rapped by the Chairman of the Financial Services Authority, Lord Turner, for deserting customers at a time when they’re needed most. He recently chastised providers for raising premiums and reducing cover when the likelihood of unemployment-related claims is set to increase, at the Association of British Insurers’ annual conference.

PPI lobbyist Sara-Ann Burgess from independent firm Burgesses applauds his input, but suggests firmer action must be taken to clamp down on the disgraceful behaviour of credit providers who are happy to push restrictive cover onto customers when they clearly do not have their interests at heart.

She comments: “Only a couple of months ago it was announced that a number of insurers were hiking up costs by 40% and drawing up a list of sectors and professions they would not cover if redundancy occurred. Given that insurance is the delivery of a promise and policies are sold on the basis of that promise, I conclude some providers are selling under false pretences which in my view is fraud.”

The ABI reports that PPI unemployment claims are soaring - claims at the end of January reached 32,099, a 203% increase on the previous year. Lord Turner in his speech indicated that the behaviour of PPI insurers was at odds with the FSA’s principles of treating customers fairly.

He asked: “How many consumers would have taken up this cover if they had known that at the very time they needed the protection more, the price of it would significantly increase or the amount of cover decrease? This is an area where insurers must expect us to intervene to address poor consumer outcomes. And more than that they must think clearly about the impact of their actions on the sector’s reputation.”

“Indeed, agrees Sara-Ann. “We frequently hear of cases where providers have stooped to new lows in a bid to get more money from customers. The only thing that will stop these perpetrators is closer scrutiny, stricter regulation and steeper fines. Until then, they will continue to financially damage consumers and sully the reputation of the more ethical providers who are working to help people shore-up their finances at a time of economic crisis.”

Where properly sold, PPI provides an invaluable financial safety net for those suffering hardship due to a loss of income because of redundancy, accident or sickness. It makes tax-free payments for up to a year, ensuring loan, mortgage, credit card and wider bill commitments are met.

However, when improperly sold, the consequences can be disastrous. The Financial Ombudsman Service recently awarded a Suffolk couple £27,000 in compensation after they were mis-sold PPI by Barclays homeowner-loan subsidiary First Plus – one of the UK’s largest PPI payouts.

The couple were offered a £100,000 loan to pay off previous debts and help with bills, but were told that they could only borrow the full amount if they paid a further £25,000 for PPI. Prior to this discussion, they were advised that PPI was optional. The representative automatically calculated the loan repayments to include PPI - a move which has been outlawed by the FSA and Competition Commission - and failed to point out they could shop around for cover. It was only when they were struggling to make their repayments and approached another bank that they realised how expensive their premiums were.

According to their financial claims company, Brunel Franklin, the total insurance cost would have been £55,000, more than half the amount of the loan.

“This is a staggering price to pay for cover,” says Sara-Ann. “Lenders can make obscene profits on single premium PPI – where the cost of the premium is added onto the overall loan amount and interest is charged on both. The sooner the FSA fines every firm that continues to sell this abhorrent cover, the better.

“Monthly policies, that can be cancelled at anytime, are far better as they give consumers more flexibility and substantially lower costs. What does concern me though is that First Plus is part of Barclays and claims are paid by their outfit in Dublin. Their decision-makers should have protocols in place that prevent this type of ‘daylight robbery’ occurring and they should use UK-based business to deliver their claims promise.”

Barclays earlier this year challenged the Commission’s rulings which included banning the sale of PPI at the time a loan is taken out and prohibiting the sale of single premium policies.

Sara-Ann concludes: “Given the outrageous profit they appear to be making from these policies, it’s not surprising they were quick to delay the timetable for change. The Commission’s recommendations were meant to come into force next year, but this could be put back now, giving them a wider window of opportunity to profiteer at customers’ expense. Greater FSA enforcement is needed now.”

Standalone providers such as Burgesses and British Insurance are widely recognised as offering monthly policies that are substantially cheaper than High Street lenders, despite providing cover that has additional benefits and support mechanisms.

News that Lloyds is to close all of its Cheltenham & Gloucester branches with a loss of 3,660 jobs serves to underline the importance of having a policy that will pay your monthly bills should you be made redundant says Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

She says: “As lending increases, there are predictions we are through the recession, but I don’t believe we are out of the woods yet and borrowers need to be cautious and make sure they can meet their bill commitments if their circumstances change. More money may be passing hands, but this does not mean people’s jobs are more secure than they were six months ago and neither does it suggest they can continue to repay their debts if they fall on hard times.”

Retiring Monetary Policy Committee member and leading economist David Blanchflower recently predicted that at least a million more people will lose their jobs before unemployment peaks in the UK – he estimates around 100,000 people are set to lose their jobs every month until the end of the year.

The Centre of Economic Business Research says one in 56 businesses will fail this year – up 59% from the 22,600 last year - and there are expectations this will increase to one in 50, or 39,000, next year.

The doom and gloom is not restricted to business – a survey undertaken by Abbey reveals the amount saved every month continues to decrease. In Q1 this year, savers put away an average of £163 per month, in Q2 it was £120. The biggest fall is when compared to last year – the lender found people are now saving £315 less per month.

Sara-Ann comments: “This is not surprising given the huge increases in food, fuel, utility and other costs – there’s simply less spare cash to go round. Everyone wants the economy to pick up and increased lending will kick-start it, but I do not want to see people suffer financially because they have taken out a loan and not thought through the long term implications of what would happen if their salary was interrupted and they were unable to make their repayments.”

According to the Council of Mortgage Lenders there are 11.7million mortgages in the UK, with loans worth over £1.1 trillion. However, statistics from the Association of British Insurers suggest very few borrowers who lose their jobs are drawing monthly tax free payments from their PPI – a policy that pays a pre-determined sum for up to a year should accident, sickness or unemployment occur.

At the end of January this year, 32,077 unemployment claims were received. Although this is a 203% increase on the number of claims in 2008 (10,581) it represents a fraction of people with loans.

“Arrears and repossessions are rising dramatically which suggests very few people have a financial safety net in the form of a PPI policy or savings to fall back on,” Sara-Ann continues. “I therefore urge anyone taking out a loan – particularly a mortgage – to consider PPI. I suspect the low take up is due to the poor reputation of providers in this sector – but not all should be tarred with the same brush. Borrowers do not have to take out the policy their credit provider recommends, it is not a condition of the loan, and there are plenty of low-cost, good-quality policies available from standalone firms.”

The Council of Mortgage Lenders indicates repossessions were 51% higher in the first quarter this year than in 2008 and predicts, along with Citizens Advice and Shelter that over half a million people will fall behind with their mortgage payments this year. A figure Sara-Ann believes could be reduced if PPI was automatically included with mortgage offers.

She concludes: “New house purchase mortgage approvals are up 41% - whilst this is good news, I wonder how many first time buyers have a financial safety net in place. Buying the house is one thing – but keeping it is another. Fewer arrears and repossessions would occur if people were given a policy – in the long term it would save lenders millions and stabilise their sector as the risk of default would be minimal, plus it would address the low take-up, protecting more borrowers, reducing their financial stress and keeping a roof over their heads.”

Payment Protection Insurance lobbyist Sara-Ann Burgess, Managing Director of specialist firm Burgesses, has won the Outstanding Personal Achievement accolade in this year’s Best Business Awards.

Sara-Ann received the Award in recognition of her involvement with another independent PPI firm, British Insurance, where she is General Manager.

Despite credit providers accounting for 90% of all PPI sales, British Insurance is widely recognised as ahead of the pack when it comes to internet-sourced cover. It has received more awards for its market-leading portfolio and outstanding customer service than any other PPI provider in the UK and as a result, the firm was asked to join Europe’s largest insurance intermediary – the Towergate Partnership – in 2008.

Sara-Ann is considered a leading authority on payment protection insurance and has for years fought to break the lenders’ monopoly in this sector, abolish anti-competitive practices, secure a better deal for consumers and make insurance easily accessible to all. This award is testament to her efforts.

The Best Business Awards are run by Awards Intelligence, an independent firm that recognises and rewards best practice across the public and private sector. Organisations can enter around 20 categories and their submissions are scrutinised by a judging panel drawn from business leaders and past award winners specialising in differing disciplines.

Around 150 entries are judged on a quarterly basis and to win the Outstanding Personal Achievement award, Sara-Ann had to demonstrate how she launched and built her business or led it to greatness. She was scored against specific criteria where particular emphasis was placed on success and innovation.

Awards Intelligence’s Mark Llewellyn-Slade gave feedback from the chairman of the judges. He said: “Sara-Ann played a key role in building British Insurance into a market leader in payment protection insurance. The judges were particularly impressed with the way the company has harnessed the power of online technology to deliver quality insurance at market leading prices. This, coupled with their no-nonsense approach to business and excellent customer service makes for a powerful proposition. Sara-Ann’s focus, drive and determination have been instrumental in British Insurance achieving success.”

Sara-Ann commented: “I’m delighted to have won this award - in a lender-dominated market, small players have a crucial role to play to ensure consumers have a choice of providers when it comes to PPI. Burgesses and British Insurance will continue to take on the larger players and endeavour to stop credit providers working to the detriment of consumers.”

People taking out loans or mortgages are at grave risk of being mis-sold Payment Protection Insurance by their credit provider warns PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.

She believes High Street lenders are continuing to pressurise customers into taking out their own PPI by making it a condition of the loan, or in the case of single premium PPI, automatically including cover and adding the cost, plus interest, onto the loan repayment amount, without borrowers’ realising.

Sara-Ann comments: “Lenders have for years been fleecing their customers, making huge profits out of PPI and damaging the reputation of all PPI providers. Now they’re keener than ever to push this product as it will make up for the profit shortfalls they’re experiencing following downturns in other areas.

“Where properly sold, PPI provides an invaluable financial safety net if an income is interrupted because of accident, sickness or unemployment. It allows people to continue with their loan or mortgage repayments, even if they haven’t got an income coming in, for up to a year and has a huge role in helping people through this recession.”

She continues: “But it is not appropriate for everyone and this is the problem – lenders don’t care whether it’s the right product or not, they just want to make a sale, so it’s imperative borrowers are aware of their rights. No one has to buy the policy their lender offers, it is not a condition of the loan and it is perfectly acceptable to say no, assess whether a policy is suitable and shop around for cover - as is the case with any other insurance.

“Rising unemployment is prompting more consumers to consider PPI and this is where lenders are cashing in – they know people want to have the peace of mind that PPI provides and either are playing on customers’ insecurities or sneaking the cover through with the loan application.”

Whilst these tactics have been condemned by the Financial Services Authority, the Competition Commission and the Financial Ombudsman Service, many lenders are still ignoring requests to change the way they sell PPI, keen to boost their coffers at their customers’ expense.

The Financial Ombudsman Service in its Annual Review recently reported the number of PPI complaints had tripled in a year. In the financial year up to 31 March 08 it received 10,652 complaints, 12 months later this had risen to 31,066 – ahead of its 30,000 prediction for that year. On average, the Ombudsman upholds 57% of all the cases it handles, with PPI this increases to 89%.

Complaints were primarily to do with PPI sales rather than the rejection of claims and the majority were associated with single premium policies – a product that was supposed to be banned at the end of last month before Barclays and Lloyds challenged the Commission’s decision.

Sara-Ann explains: “The FSA called upon firms to stop selling single premium cover in February and the Commission set a deadline of the end of May for an outright ban. Now the Commission’s rulings have been challenged, everything has been put on the back-burner, so credit providers can still sell single premium cover.

I suspect they will be happy to face the wrath of the FSA - even if they only sell this cover for a short time, huge profits will be generated. However, I fear increased urgency could result in increased pressure on borrowers.”

Confirming these fears, the Ombudsman reported the most common complaints were from borrowers pressurised into purchasing a policy and from those not realising they had agreed to purchase cover.

Consumers who ‘unwittingly’ purchased cover stated that if they’d understood the policy restrictions in the first place, they would never have bought the policy. The FOS also voiced concern about consumers not realising they had borrowed money up front, with the extra interest implications, to pay for a single premium policy.

To compound their errors, lenders were also lambasted for not treating customers fairly when it came to handling after-sale complaints. Half of all the Ombudsman’s disputes were from the six largest financial services groups and Chief Ombudsman Walter Merricks berated businesses handling PPI complaints stating they had treated customers ‘nothing short of dismal’ and suggested there was a widespread problem amongst the PPI sector.

A view confirmed by PPI complaints portal PortalClaims. It recently named and shamed the top 10 offenders for dragging their feet when it came to responding to customers’ complaints. Lloyds, Barclays, Welcome, Black Horse and MBNA topped the poll with less than 20% of complaints responded to. Out of 109 complaints submitted to Barclays, just one per cent received a compensation offer. The remaining five were; GE Money, HFC, RBS, NatWest and Yorkshire Bank.

Sara-Ann concludes: “Given 89% of the Ombudsman’s complaints were upheld last year – way above their average – it underlines just how happy lenders are to ‘fob off’ consumers. They’re arrogant, over-bearing and without morals and customers must not be drawn into purchasing cover that can be sourced elsewhere from firms not linked in with the credit provision. Independents offer more competitive premiums and superior cover and benefits.”

These hard-pressed times have prompted banks and building societies to introduce a number of money education schemes. They’ve been launched in an attempt to make consumers more financially-savvy and despite them described as offering independent and impartial advice, Payment Protection lobbyist Sara-Ann Burgess from specialist firm, Burgesses, thinks otherwise.

She is sceptical about their altruistic motives – referring to findings from the Competition Commission‘s investigation into the PPI sector and citing Which? feedback on NatWest’s MoneySense service.

Sara-Ann says: “Let’s not forget the morals of the High Street banks and building societies were seriously questioned by the Commission after learning these PPI providers sell 80% of the policies in the market, take over 70% of premiums in commission instead of using it to pay claims, encourage customers to waste £350m a year on cover that fails to pay out and lures borrowers with low APR rates and then adds PPI onto the loan, dramatically increasing the APR.”

The Commission found issues with over-pricing, product design and irresponsible/pressurised sales, asked whether lenders were using PPI products to clear their debts and stated they were seriously harming the interests of consumers. In June 2008, it criticised providers for overcharging consumers £1.4bn a year – representing a 490% return for the 12 largest distributors.

Sara-Ann continues: “Now all of a sudden, these ethically-barren organisations have turned over a new leaf and are jumping at the chance to launch initiatives for the good of the consumer. We all know there’s a hidden agenda to push their products even more and so prop up their failing profits and my suspicions are beginning to be confirmed.”

Earlier this month, Which? released its mystery shopper findings indicating NatWest’s MoneySense service was far from impartial. The service was promoted on national television, explaining how MoneySense advisers in 1000 branches were there not to sell, but to give free impartial financial guidance. When researchers put this to the test, they found that only four out of 20 branches provided impartial advice without an attempt either at, or after the meeting, to interest customers in new products.

In some instances, the advisers spoke exclusively about NatWest products, made no reference to shopping around for the best deal and passed enquirers onto customer service advisers. When asked about what products offered the best rates, a NatWest product was offered, despite it being one of the least competitive.
The Financial Services Authority is piloting a Money Guidance Service in the North West and only last week the Nationwide launched a Money Active scheme working in a three year partnership with the Citizens Advice Bureau. Nationwide announced it was investing three million pounds to fund the training of 1300 CAB volunteers to run financial education sessions that are set to benefit 10,000 people.

Sara-Ann concludes: “It’s been made clear the financial sessions will be run by impartial, independent volunteers and rolled out in an increasing number of CAB offices over the years. I sincerely hope this is the case, as we’re beginning to find out that schemes launched under the guise of impartiality are failing to live up to expectations.

“I also wonder why millions of pounds are being investigated in a scheme for the ‘greater good’, when technically it will do little to boost Nationwide’s coffers. What strategy will Nationwide use to recoup these millions? The optimist in me says the scheme is being launched for the greater good and to help consumers avoid getting into a financial crisis, but the pessimist worries volunteers will feel compelled to plug their products.”