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.

News that the Financial Services Authority will have increased power as a result of the Financial Services and Business Bill is to be applauded, but as is usual with a number of Government-led initiatives – it is too little, too late, says Payment Protection Insurance lobbyist, Sara-Ann Burgess from specialist firm Burgesses.

Earlier this week draft legislation was published with the intention of promoting stability, efficiency and competition in the financial markets. As well as strengthening regulation, it is designed to further protect and support customers and boost their financial capability, plus tighten up consumer-focused regulation.

However, Sara-Ann is concerned that the wheels of bureaucracy continue to move far too slowly and more effective measures need to be implemented now to protect consumers against unscrupulous financial services providers who do not have customers’ best interests at heart.

The PPI sector in particular has been slated over the years for failing to treat customers fairly and despite a two-year long investigation by the Competition Commission into policy mis-selling, followed by a damning verdict that called for sweeping changes, nothing is in place to protect consumers against over-pricing, poor product design, irresponsible and pressurised sales and poor claims administration.

PPI is designed to pay claimants a pre-determined income in the event their salary is interrupted because of accident, sickness and unemployment and is particularly important in this current claimant as it can help keep families financially afloat during times of hardship.

Although a number of remedial measures have been identified to put things right in this beleaguered sector, it won’t be until 2010 before any of them come into force. Recommendations include; a ban on lenders selling PPI at the time a loan is taken out and for 14 days after, a ban on the sale of single premium policies (where the cost of the policy is added onto the loan amount and interest charged on both), the need for lenders to separate out the PPI quote from the loan cost and an undertaking to provide more information to allow consumers to shop around for cover.

In a bid to hold-up the roll out of the Commission recommendations, two providers have challenged the ruling, giving lenders a free hand to move the goal posts when it comes to policy terms and conditions and so increase the likelihood of consumers falling victim to underhand sales tactics.

Sara-Ann comments: “PPI providers have behaved shamefully over the years, taking millions from vulnerable consumers. They know customers are paying over the odds for cover and in many cases, will never be able to claim. Even more damning are the instances where providers in the past few months have turned their backs on consumers when they need them most.”

Her comments refer to actions by credit providers with a monopoly on PPI – around an 80% market share – who have recently increased premiums by up to 70%, reduced the benefits payable and ‘ring-fenced’ certain professions and sectors as uninsurable.

Sara-Ann continues: “Take-up of this product has traditionally been low which is why providers pressurise people into buying cover when they take out a loan. In recent months demand for cover has increased amidst fears of increasing unemployment. But instead of responding with a pledge to provide consumers with an affordable safety net that will repay their financial commitments in the event of a job loss, they are penalising customers – cherry picking who they want, paying out less and charging more into the bargain.”

In April the Post Office gave customers 30 days notice of its intention to restrict their PPI payouts to a maximum of £1500, instead of £2500, and increased the waiting period from 60 to 90 days.

The Financial Services Authority this month met with a number of trade bodies representing PPI providers to voice concerns that consumers with PPI are not being treated fairly. It questions why providers are making changes at a time when demand for cover is rising and says it will intervene to address poor customer treatment. The response from the trade bodies is that ‘discussions are continuing’.

“This is a week response,” says Sara-Ann “and demonstrates why we need action now. We’ve known since 2005 – when the Citizens Advice Bureau lodged its super-complaint with the Office of Fair Trading - that providers in this sector were ripping off consumers and preying on their vulnerabilities. Since then complaints to the Financial Ombudsman Service have rocketed to over 31,000 and an increasing number of firms have been fined. However, this does not appear to stop providers acting immorally.”

Gordon Brown says through the future Financial Services and Business Bill, the Government will toughen regulation in the financial services sector, ensuring the FSA has sufficient powers to do its job.

Sara-Ann concludes: “I fear this is rhetoric and will have little immediate impact on consumers. Yes, increased regulation may reduce the number of PPI providers treating customers unfairly, but how long will we have to wait? It’s been four years since the initial PPI investigations started and April and October 2010 are the first dates set for change – and even this is doubtful.

“Actions speak louder than words and until the FSA is able to demonstrate its clout and punish PPI providers who continue to ruin the reputation of all in this sector, consumers will continue to suffer. Rush through this Bill now, better empower the FSA and restore confidence in a product that provides a financial lifeline for those in difficulty.”

More reputable independent firms, not linked to the provision of credit, offer premiums that are way below those quoted by High Street lenders. British Insurance, for example, charges £3.40 per £100 of benefit for unemployment only cover, the provider has never received a product or service complaint and has won more third-party awards and endorsements than any other PPI firm. It also ensures claimants receive pay outs from day one and has not restricted cover of those it will insure.

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.”

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.”

News that the Citizens Advice Bureau witnessed a 179% rise in inquiries about redundancy in the first three months of the year has prompted Payment Protection Insurance lobbyist Sara-Ann Burgess to review the options available to people who fall into debt because of a lost income.

She comments: “Recent statistics show more and more indebted people are opting for bankruptcy or Individual Voluntary Arrangements. A bankruptcy order may be obtained by a creditor for debts of £750 or more, or a debtor can bankrupt him or herself by filling in forms at a County Court. The debtor’s assets are sold and money distributed to the creditors, after insolvency practitioners’ fees are taken. If there’s a shortfall, it’s written off and in most cases, bankruptcy ends after one year when the slate is wiped clean.

However, bankruptcy is usually seen as a last resort as there’s a risk of losing your house, your financial downfall is made public and it will affect your ability to secure credit in the future.”

Sara-Ann continues: “IVAs, on the other hand, are more of a private matter. They allow people to settle their personal loan debts and outstanding credit card balances within a reasonable period of time with their creditors. An IVA is a legally binding contract between debtor and creditor – a payment period and amount is agreed, usually around five years and whatever the debtor can afford - and once the final payment is made, any remaining debt is legally written off.

“They’re organised via an insolvency practitioner and although there are cases where a property has to be remortgaged to release funds, you should at least keep your home.”

The Government Insolvency Service in May announced that the number of bankruptcies and IVAs had reached new highs in the first three months of 2009. There were 19,062 bankruptcies and 10,713 IVAs – 19% more than a year ago - and insolvency specialist Begbies Traynor predicts personal insolvencies could top 125,000.

But credit risk management firm TDX warns that as the number of people opting for these arrangements continues to grow, so too will the percentage of those unable to meet the criteria required by IVAs or other debt management plans. Analysis shows that of all IVAs activated, 40% were never completed and 15% stopped paying in the first year.

In April, a third option was introduced; Debt Relief Orders. Described as cheap, accessible insolvency options for people with debts below £15,000, (excluding student or secured loans, child support payments, arrears and court fines) and little or no prospect of repaying, they effectively allow them to discharge their financial liabilities after a year.

Sara-Ann explains: “There’s a strict criteria that must be met before the Insolvency Service will approve an application. The debtor has to have no more than £50 a month in surplus income, less than £300 in assets (including savings, shares, cars, caravans, antiques etc) and must not be homeowner. Given the CAB says the average debt is £16,971 and more inquiries are coming from homeowners, this would exclude a lot of people.”

Unemployment figures released this week indicate the redundancy spiral is set to continue, despite many believing we are heading out of recession. In the three months to April, the jobless total topped 2.261 million, the highest since November 1996.

Sara-Ann concludes: “With more people contacting the CAB with redundancy concerns, I would like to see more advice and guidance on PPI – it will help people tackle their debt problems before a job loss occurs and provide a support mechanism should the worst happen. I therefore believe it should top people’s ‘things to consider when reviewing finances’ list.

“Those with this cover will get their monthly financial commitments paid for up to a year if they lose their job, removing the need to have to consider any insolvency or debt relief options. By taking out a policy now, you can effectively stabilise your finances should circumstances change.”

PPI does not have to be purchased from loan or credit card providers; low-cost, good quality products are available from standalone firms offering superior cover and benefits. For example, British Insurance charges £3.40 per £100 of benefit for an unemployment-only policy. This means a person with financial commitments costing £500 a month would pay £17 a month in premiums. In the event of job loss, £500 a month would be paid for up to a year.

British Insurance’s policies offer back to day one payouts, age-rated premiums, a choice of cover options and carer support. There’s also a free back to work service for claimants with unemployment cover which includes; self help guides, access to a specialist website, job vacancy database and telephone advice via employment counsellors. Claimants can get ongoing support and guidance on work searches, career changes, state benefits, managing time effectively, tips on CV preparation and help with interviews.

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.

Banks and building societies that continue to use devious tactics to take cash from customers must be boycotted says Payment Protection Insurance lobbyist Sara-Ann Burgess from specialist firm Burgesses.

Her call to action follows news that credit providers are charging customers as much for monthly-paid payment protection insurance as they did for now-outlawed single premium policies – when the cost was added onto the value of the loan and interest charged on both. Payment protection meets monthly financial commitments such as loans, mortgages and credit card bills if the policyholder’s income is interrupted due to redundancy, an accident or sickness.

Consumer association Which? recently published research revealing how a customer repaying a £5000 Alliance & Leicester loan with monthly PPI in June would shell out the same in interest payments and premiums as a loan with a single premium policy in November 08.

The Financial Services Authority called for members to stop selling single premium policies earlier this year – a move that was criticised by many credit providers who foresaw a dramatic dip in profits. Financial research firm Datamonitor estimated that in 2007, single premium products accounted for 68% of a £5.5bn + market dominated by lenders.

Sara-Ann comments: “Credit providers have made vast profits out of PPI over the years and they do not want this income stream to end. Rather than lose out, they’re pressurising customers into buying cover at extortionate premiums at the time their loan is agreed. And it isn’t just in the area of PPI where lenders are fleecing customers and showing their true colours – they’re hiking up loan rates, contrary to Bank of England reductions, and plundering customers’ everyday accounts by increasing overdraft costs.”

Financial comparison firms Moneyfacts, Moneyextra and Moneysupermarket confirm this. Moneyfacts recently issued reports detailing how lenders are ignoring base rates and making their own rate adjustments in a bid to seize more cash from customers. It revealed how the unsecured personal loan rate for a person borrowing £5000 has jumped 44% in two years. The average rate in May 07 was 8.6% and it is now 12.4%.

Moneyextra highlighted how lenders have set their Standard Variable Rate at an average of 4.19% above the base rate of 0.5% - in the case of Cheltenham & Gloucester and Lloyds it is up to 5.99%. This time last year the average rate was 1.9%. It reported a third of those surveyed were unaware the average SVR is 8 times higher than the base rate and voiced concerns at customers misguided sense of loyalty towards lenders in trusting them to adjust rates in line with base rate settings.

Moneysupermarket scrutinised overdraft interest rates and found that lenders have been quick to increase the financial pressure on customers already in the red. Nationwide has hiked its Flexi Account overdraft costs from 9.9% in February last year to 18.9% in June this year and Barclays account holders will pay 19.3% from 8 June, as opposed to 15.6% last year. Lloyds, HSBC and NatWest customers will pay between 18.9 and 19.24%.

Sara-Ann continues: “It’s costing more to borrow money, at a time when the Bank of England is stabilising rates. Lenders are making customers pay more when they act in a financially responsible way and take out PPI and punishing them if they go overdrawn. People need all the financial support they can get, but they are being bled dry by the very institutions that caused the economic downturn in the first place.”

She concludes: “I urge disgruntled customers to vote with their feet and where they can, move their accounts elsewhere and search for more competitive loans. In the case of PPI, source cover from independent providers – they offer far superior benefits and cover and the premiums are cheaper.”

Standalone firm British Insurance has won more awards for its PPI portfolio and customer service than any other UK firm. Premiums are £3.40 per £100 of benefit for unemployment cover.

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.”