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Last Updated: Monday, 12 September 2005, 22:59 GMT 23:59 UK
Debt insurance being 'mis-sold'
Credit card
Payment protection insurance is available on credit cards and loans
Banks and insurers have been accused by Citizens Advice of mis-selling payment protection insurance (PPI).

PPI is designed to help people repay personal loans or credit card debt if they fall ill or lose their jobs.

But charity Citizens Advice said PPI is expensive, often sold to people who do not need it and regularly excludes common reasons for making a claim.

The charity is to lodge a "super complaint" with the Office of Fair Trading (OFT) over the 5bn industry.

Under consumer law, the OFT is supposed to investigate super complaints made by Citizens Advice, Which?, the National Consumer Council and Energywatch.

Insurance problems

We badly need an official investigation of how this market is operating, leading to effective regulation that ensures a fair deal for all consumers
David Harker, Citizens Advice

Citizens Advice outlined a host of problems with PPI, based in part on reports from people attending its Citizens Advice bureaux.

It said policies offered by mainstream lenders often excluded cover for common problems such as bad backs and mental illness.

Many policies also had arbitrary age limits or banned people who were self-employed or on fixed-term contracts from making a claim.

But the British Bankers' Association (BBA) said that the sale of PPI policies was governed by strict rules.

"The Financial Services Authority regulates the sale of PPI and what cover is made clear to purchasers," Brian Capon, spokesman for the BBA told BBC News.

"PPI is completely voluntary and the key is for purchasers to always make sure the cover matches their needs."

Payment delays

Citizens Advice said that 85% of its clients who had claimed on one of the policies had been unsuccessful, despite the industry claiming that just 15% of claims are turned down.

The charity also said that delays in the payment of claims could lead to policyholders being pursued by debt collectors and threatened with court action.

Premiums for the policies are often added on to the total amount borrowed, which Citizens Advice said in the case of some credit cards could push up the cost of borrowing by around 9% a year.

"We badly need an official investigation of how this market is operating, leading to effective regulation that ensures a fair deal for all consumers, and which also protects the most vulnerable," David Harker, Citizens Advice chief executive, said.

One woman's experience of payment protection insurance

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