The Office of Fair Trading (OFT) has decided to undertake an investigation into the sales of payment...
The Office of Fair Trading (OFT) has decided to undertake an investigation into the sales of payment protection insurance (PPI) after caving into pressure from the Citizens Advice Bureau.
The decision came after the OFT received a 'super-complaint' from the independent advisory group arguing that the size of the sector, the complexity of the product and the way the product is sold are seriously harming the interest of consumers.
In preparing to probe the sector, the OFT outlined a number of issues which suggest the sector is not working well for consumers, including difficulties for consumers in gaining information about alternative suppliers, the wide degree of pricing and the fact that gross profit margins appear high.
"Payment protection insurance is a complex product, often bought almost as an afterthought. Borrowers may shop around for credit, but the complex nature of payment protection insurance and a lack of choice mean that they are less likely to shop around for it. There is a high potential for consumer detriment - our study will look at whether consumers are getting a good deal or not," commented John Fingleton, chief executive at the OFT.
The scope of the study will be announced in early 2006 after the Competition Commission (CC) has reported its findings on store cards and associated PPI. The result from the CC investigation as well as the Financial Services Authority's thematic work on PPI will play a key role in influencing the direction of OFT's study.
Meanwhile, a separate announcement from insurance broker Paymentcare has also stepped up the PPI debate. A major mystery-shopping exercise undertaken by the firm showed that high-street banks are still not making it clear to consumers that they do not have to take out PPI when applying for personal loan repayments.
